UC-NRLF 


^j'^he  War  Tax  Law 

&73 


Guaranty  Trust  Company 
of  New  York 


GIFT  or 


The  War  Tax  Law 


Approved  October  3,  1917 


Guaranty  Trust  Company  of  New  York 

140  Broadway 

LONDON    OFFICE  FIFTH  AVENUE  OFFICE  PARIS    OFFICE 

32  Lombard  St.,  E.  C.  Fifth  Arenue  and  43d  Street  Rue  des  Italiens,  1  &  3 


COPYRIGHT,    1917 
GUARANTY  TRUST  COMPANY   OF  NEW  YORK 


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Contents 

PAGE 

Foreword 

5 

Synopsis  of  Law 

7 

Full  Text  of  Law 

65 

Index  to  Synopsis 

129 

3G6496 


FOREWORD 

IN  providing  for  war  revenue,  the  War  Tax 
Act  has  been  so  framed  as  to  make  the 
assessment  for  war  purposes  additional 
to  taxes  which  are  already  eflfective  under 
existing  law.  Taxes  provided  for  in  this 
Act  are  thus  separate  and  distinct  from  ex- 
isting taxes,  and,  when  the  time  comes  for 
abolishing  war  taxes,  it  may  be  done  without 
affecting  general  tax  laws  existing  prior  to 
the  War  Tax  Law. 

This  digest  has  been  prepared  in  such  a 
way  as  to  make  clear  this  separation  of  War 
Taxes  from  those  existing  before  this  en- 
actment. If  similar  assessments  have  been 
made  under  former  laws,  both  the  existing 
tax  and  the  war  tax  are  given. 

The  amendments  to  the  Federal  Income 
Tax  Law  which  are  included  under  the 
subject  of  "Income  Taxes,"  although  con- 
tained in  the  War  Tax  Law,  are  amend- 
ments to  the  Income  Tax  Law  of  September 
8,  1916,  and,  as  explained  above,  should  not 
be  confused  with  the  war  tax  legislation. 

October  4,  1917 


Synopsis  of 

The  War  Tax  Law 

Af^rored  October  3,  1917 


War  Income  Tax 

INDIVIDUALS 

Normal  Tax 

In  addition  to  the  present  rate  of  normal  tax  of  2%,  the 
law  provides  for  a  further  normal  tax  of  2%  on  incomes 
of  residents  or  citizens  of  the  United  States  in  excess  of 
$2,000  for  married  persons  or  heads  of  families,  or  in 
excess  of  $1,000  for  single  persons.  By  the  assessment  of 
this  additional  tax  of  2%,  incomes  in  excess  of  $4,000  for 
married  persons  or  heads  of  families,  or  $3,000  for  single 
persons,  will  be  subject  to  a  normal  tax  of  4%.     (Sec.  1.) 

It  will  be  noted  that  the  additional  normal  tax  does  not 
apply  to  non-resident  alien  individuals. 

Surtax 

In  addition  to  the  surtax  imposed  by  the  act  of  Septem- 
ber 8,  1916,  a  further  surtax  on  incomes  of  citizens  and 
residents  of  the  United  States  and  non-resident  ahens,  is 
imposed  as  shown  in  the  chart  on  the  following  page: 
(Sec,  2.) 

(The  chart  includes  the  rates  of  the  existing  tax,  the  war  tax 
and  total  tax.) 

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[8] 


Collection  of  Tax 

Additional  taxes  under  the  War  Tax  Law  shall  be 
levied,  assessed,  collected  and  paid  in  the  same  manner 
as  similar  taxes  imposed  by  the  Income  Tax  Law  of 
September  8,  1916.     {Sec,  3.) 

Exemptions 

For  the  purpose  of  the  assessment  of  the  additional  war 
tax,  the  specific  exemption  allowed  to  married  persons  or 
heads  of  families  shall  be  $2,000,  and  for  single  persons, 
$1,000.     (Sec.  3.) 

By  the  amendment  to  Section  7,  Act  of  September  8,  1916,  it  is  provided 
that  the  head  of  a  family  shall  be  entitled  to  an  additional  exemption  of 
$200  for  each  child  dependent  upon  him  or  her,  if  under  eighteen  years  of 
age,  or  if  incapable  of  self-support  because  mentally  or  physically  defective 
(Page  12.) 

Returns 

Annual  returns  for  taxes  are  required  for  net  incomes 
of  $1,000  or  over,  in  the  case  of  single  persons,  and  $2,000 
or  over,  in  the  case  of  married  persons  or  heads  of  families. 

(Sec.  3.) 

Deduction  at  Source 

Deduction  of  tax  at  the  source  on  interest  derived  from 
tax  free  bonds  shall  not  apply  to  the  additional  normal 
tax  of  two  per  centum  until  after  January  1,  1918,  and 
thereafter  only  one  two  per  centum  normal  tax  shall  be 
deducted.  Any  further  normal  tax,  for  which  the  recipient 
of  such  income  is  liable,  shall  be  paid  by  the  recipient. 
(Sec.  3.) 

CORPORATIONS 
Additional  Tax 

In  addition  to  the  tax  of  2%  now  assessed  on  net  earn- 
ings of  corporations,  under  the  act  of  September  8,  1916, 
the  War  Tax  Law  provides  for  a  further  tax  of  4%, 
making  the  total  income  tax  on  net  earnings  now  6%. 
{Sec.  4.) 

[9] 


Collection  of  Tax 

The  additional  tax  shall  be  levied,  assessed,  collected 
and  paid  in  the  same  manner  as  the  tax  imposed  by  the 
act  of  September  8, 1916,  as  amended.     {Sec,  4.) 

Dividends 

For  the  purpose  of  the  assessment  of  the  additional 
tax,  the  income  of  a  corporation  shall  be  credited  with  the 
amount  received  as  dividends  upon  the  stock  or  from  the 
net  earnings  of  any  other  corporation,  which  is  taxable 
upon  its  net  income  for  the  additional  tax.     (Sec.  4.) 

EFFECTIVE  DATE  OF  LAW 

The  additional  taxes  provided  for  shall  be  assessed  for 
the  calendar  year  1917  and  each  year  thereafter. 

If  a  corporation  has  fixed  its  own  fiscal  year,  the  addi- 
tional tax  imposed  for  the  fiscal  year  ending  during  the 
calendar  year  1917  shall  be  assessed,  collected  and  paid 
only  on  that  proportion  of  its  income  for  such  fiscal  year 
which  the  period  between  January  1,  1917,  and  the  end  of 
such  fiscal  year  bears  to  the  whole  fiscal  year.     (Sec.  4.) 

PORTO  RICO  AND  THE  PHILIPPINE  ISLANDS 

The  provisions  of  this  title  do  not  extend  to  Porto  Rico 
or  the  Philippine  Islands,  and  the  legislatures  of  Porto 
Rico  and  the  Philippine  Islands  are  given  power  to  amend, 
alter,  modify  or  repeal  the  income  tax  laws  enforced  in 
Porto  Rico  or  the  Philippine  Islands.     (Sec,  5.) 


[10] 


Income  Tax  Amendments 

Changes  in  the  law  of 
September  8,  1916 

INDIVIDUALS 

Tax  on  Dividends 

Dividends  paid  from  earnings  acquired  subsequent  to 
March  1,  1913,  are  taxable.  The  amendment  of  the  In- 
come Tax  Law  provides  that  dividends  shall  be  deemed  to 
have  been  paid  from  the  net  income  of  the  year  in  which 
paid,  or  from  the  most  recently  accumulated  surplus,  and 
shall  constitute  income  of  the  shareholder  for  the  year  in 
which  received,  but  be  taxed  at  the  rates  prescribed  for 
the  year  in  which  earned  by  the  corporation.  The  above 
provisions  do  not  apply  to  distributions  made  prior  to 
August  6,  1917,  out  of  profits  accrued  prior  to  March  1, 
1913.     (Sec.  1211.) 

Stock  dividends  are  to  be  considered  income  to  the 
amount  of  surplus,  undivided  profits  and  earnings  so 
distributed.  (Sec.  1211.)  For  example,  if  a  corporation 
issues  a  stock  dividend  of  one  hundred  shares,  having  a 
par  value  of  $  IOC  each,  and  transfers  to  capital  an  amount 
of  surplus  and  undivided  profits  equal  to  the  value  of  the 
stock  distributed,  the  par  value  of  the  stock  received  shall 
be  returned  as  taxable  income. 

Interest  on  Government  Bonds 

Interest  on  United  States  bonds  issued  after  September 
1,  1917,  is  exempt  from  taxation  only  to  the  extent  pro- 
vided in  the  act  authorizing  the  issue.     (Sec,  1200.) 

General  Deductions 

The  law  relating  to  general  deductions  is  changed  with 
respect  to  deductions  on  account  of  taxes  and  deductions 

[111 


on  account  of  interest  on  indebtedness.  Interest  on 
indebtedness  incurred  in  the  purchase  of  obligations  or 
securitias,  the  interest  upon  which  is  exempt  from  income 
tax,  may  not  be  deducted  in  determining  net  income. 
Taxes  paid  on  income  and  excess  profits  will  also  not  be 
permitted  as  a  general  deduction.  This  applies  to  both 
citizens  and  residents  of  the  United  States  and  to  non- 
resident aliens.     (Sees.  1201,  1202.) 

Contributions  or  gifts  within  the  year  for  religious, 
charitable,  scientific,  educational  or  humanitarian  pur- 
poses, to  an  amount  not  in  excess  of  fifteen  per  centum  of 
the  taxpayer's  taxable  net  income,  when  verified  under 
prescribed  regulations,  shall  be  allowable  as  deductions. 
(Sec.  1201.) 

General  deductions  allowed  non-resident  aliens  (Sec,  6) 
will  be  permitted  only  in  case  a  true  and  accurate  return 
filed  of  all  income  received  from  sources  corporate  or 
otherwise  within  the  United  States.      (Sec.  1202.) 

Specific  Exemption 

Under  the  law  as  amended  an  additional  exemp- 
tion of  $200  for  each  dependent  child,  if  under  18  years  of 
age,  or  if  incapable  of  self  support  because  mentally  or 
physically  defective,  is  allowed.  This  additional  exemp- 
tion operates  only  in  the  case  of  one  parent  in  the  same 
family.     (Sec.  1203.) 

The  provision  of  the  law  permitting  the  specific  exemp- 
tion to  non-resident  aliens  is  repealed.     (Sec  1203.) 

PARTNERSHIPS 

Returns 

Partnerships,  when  required  to  file  return,  shall  have 
the  same  privilege  of  fixing  and  making  returns  upon  the 
basis  of  their  own  fiscal  years  as  is  accorded  to  corpora- 
tions.    (Sec.  1204.) 

[12] 


The  share  of  profits  of  a  partnership  to  which  any  tax- 
able partner  would  be  entitled  for  the  fiscal  year  ending 
in  1916  or  a  subsequent  calendar  year,  for  which  the  rates 
of  tax  have  been  or  shall  be  changed  by  law,  shall  be  returned 
for  taxation  and  the  tax  paid  under  the  respective  rates 
applicable  to  each  calendar  year  in  the  proportion  that 
the  period  of  each  calendar  year  bears  to  the  full  fiscal 
year.     {Sec.  1204.) 

Income  derived  from  interest  on  Government  bonds 
shall  be  credited  in  determining  net  income  only  to  the 
extent  that  it  is  provided  in  the  act  authorizing  the  issue 
that  they  are  exempt.     {Sec,  1204.) 


DEDUCTION  OF  THE  TAX  AT  THE  SOURCE 

Individuals,  Residents  or  Citizens 

Deduction  of  the  normal  tax  at  the  source  on  income  of 
individuals,  residents  or  citizens  of  the  United  States,  is 
abolished,  except  with  respect  to  tax  free  bonds.  Exemp- 
tion may  be  claimed  from  deduction  of  tax  on  tax  free 
bonds  by  filing  a  certificate  prior  to  February  first.  {Sec. 
1205.) 

Non-Resident  Aliens 

Deduction  of  the  normal  tax  at  the  source  on  the  income 
of    non-resident    alien    individuals    remains    unchanged. 

{Sec.  1205.) 

Foreign  Corporations  and  Firms 

Deduction  of  the  tax  at  the  source  on  dividends  payable 
to  non-resident  alien  corporations  not  having  a  place  of 
business  in  the  United  States  is  retained,  and  deduction 
of  tax  on  interest  on  bonds  of  domestic  corporations  pay- 
able to  non-resident  alien  corporations  or  firms»  not  having 
a  place  of  business  in  the  United  States,  is  also  continued. 

13] 


Tax  Withheld  During  1917 

Any  amount  of  tax  withheld  by  a  withholding  agent 
during  the  year  1917  on  account  of  tax  imposed  upon  the 
income  of  any  individual,  citizen  or  resident  of  the  U.  S., 
except  in  case  of  interest  on  tax  free  bonds,  shall  be  released 
and  paid  over  to  such  individual.     {Sec.  1212.) 

Payment  of  Tax  by  Recipients 

The  entire  tax  upon  the  income  of  individuals,  citizens 
or  residents  of  the  United  States  shall  be  paid  hereafter 
directly  by  the  owners  of  the  income,  except  where  de- 
duction at  the  source  is  authorized. 

DEDUCTION  OF  EXCESS  PROFITS  TAX 

In  assessing  income  tax,  the  net  income  embraced  in 
tlie  return  shall  be  credited  with  the  amount  of  any 
excess  profits  tax  assessed  for  the  calendar  or  fiscal  year 
upon  the  taxpayer.  In  the  case  of  a  member  of  a  partner- 
ship, the  net  income  of  the  member  shall  be  credited 
with  his  proportionate  share  of  the  excess  profits  tax  of 
the  partnership.     (Sec,  1211.) 

INCOME  OF  FOREIGN  GOVERNMENTS 

Income  of  foreign  governments  received  from  invest- 
ments in  the  United  States  in  stocks,  bonds  or  other  domes- 
tic securities,  or  from  interest  on  deposits  in  banks,  shall 
not  be  subject  to  tax.     (Sec,  1211.) 

CORPORATIONS 

Undistributed  Surplus 

In  addition  to  other  taxes,  a  tax  of  10%  shall  be  imposed 
on  the  net  income,  beginning  with  the  year  1917,  of  every 
corporation,  joint  stock  company  or  association  or  insur- 

[14] 


ance  company,  received  during  each  year  and  remaining 
undistributed  six  months  after  the  end  of  each  calendar 
or  fiscal  year.     {Sec,  1206.) 

Undistributed  income  which  is  actually  invested  or 
employed  in  the  business  or  is  retained  for  employment, 
in  the  reasonable  requirements  of  the  business,  is  not  sub- 
ject to  the  tax.  Likewise  income  invested  in  obligations 
of  the  United  States  issued  after  September  1,  1917,  is 
not  subject  to  the  tax.     (Sec,  1206.) 

11  the  Secretary  pf  the  Treasury  ascertains  and  finds 
that  income  is  retained  at  any  time  for  employment  in 
the  business  and  is  not  so  employed  or  is  not  reasonably 
required  in  the  business,  the  tax  shall  be  assessed  at  the 
rate  of  15%.     (Sec,  1206.) 

In  case  return  is  made  on  the  basis  of  a  fiscal  year 
ending  prior  to  December  31, 1917,  the  tax  shall  be  imposed 
on  that  proportion  of  the  income  which  the  part  of  the 
fiscal  year  in  the  year  1917  bears  to  the  whole  of  such 
fiscal  year.     {Sec,  1206.) 

Payments  of  Dividends 

A  corporation  is  required  to  include  in  its  annual  return 
a  statement  of  its  payments  of  dividends  which  are  made 
in  cash  or  its  equivalent  or  in  stock,  including  the  names 
and  addresses  of  stockholders  and  the  number  of  shares 
owned  by  each  and  the  applicable  amounts  in  which  such 
dividends  were  earned.     {Sec,  1210.) 

General  Deductions 

The  law  relating  to  general  deductions  is  changed  with 
respect  to  deductions  on  account  of  interest  on  indebted- 
ness and  deductions  on  account  of  taxes.  Interest  on 
indebtedness,  incurred  in  the  purchase  of  obligations  or 
securities,  the  interest  upon  which  is  exempted  from 
income  tax,  may  not  be  deducted  in  determining  net 
income.     Taxes  paid  on  income  and  excess  profits  will 

[15] 


also  not  be  permitted  as  a  general  deduction.  This 
applies  to  both  foreign  and  domestic  corporations.  {Sec. 
1207.) 

INFORMATION  AT  THE  SOURCE 

The  system  of  information  at  the  source  is  substituted 
for  deduction  of  the  tax  at  the  source  with  respect  to  in- 
come received  by  citizens  or  residents  of  the  United 
States,  except  income  derived  from  interest  on  tax  free 
bonds.  Information  at  the  source  shall  apply  to  the  calen- 
dar year  1917,  but  shall  not  apply  Jto  the  payment  of 
interest  on  bonds  of  the  United  States.     (Sec.  1211.) 

Brokers'  Returns 

Every  person,  corporation,  partnership  or  association 
doing  business  as  a  broker  on  any  exchange,  board  of 
trade  or  other  similar  place  of  business  shall,  when  required 
by  the  Commissioner  of  Internal  Revenue,  render  a  return 
showing  the  names  of  customers  for  whom  such  person, 
corporation,  partnership  or  association  has  transacted  any 
business  with  such  details  as  to  the  profits,  losses,  or  other 
information  as  will  enable  the  Commissioner  of  Internal 
Revenue  to  determine  whether  all  income  tax  due  on 
profits  or  gains  of  such  customers  has  been  paid.  (Sec. 
1211.) 

Returns  of  Miscellaneous  Income 

All  persons,  corporations,  partnerships,  associations  and 
insurance  companies,  in  whatever  capacity  acting,  includ- 
ing lessees  or  mortgagors  of  real  and  personal  property, 
trustees  acting  in  any  trust  capacity,  executors,  adminis- 
trators, receivers,  conservators  and  employers  making 
payment  due  another  person,  corporation,  partnership 
association  or  insurance  company  of  interest,  rent,  salaries, 
wages,  premium,  annuities,  compensation,  remuneration, 
emoluments  or  other  fixed  or  determinable  gains,  profits 
and  income  of  $800  or  more  in  any  taxable  year,  or  in  the 

[16] 


case  of  such  payments  made  by  the  United  States' to  officers 
or  employees  of  the  United  States  having  information  as 
to  such  payments,  and  required  to  make  returns  in  regard 
thereto,  are  authorized  and  required  to  render  a  return 
to  the  Commissioner  of  Internal  Revenue  setting  forth  the 
amount  of  such  gains,  profits  and  income  and  the  names 
and  addresses  of  the  recipients  of  such  payments.  {Sec, 
1211.) 

Returns  of  Interest  on  Bonds  and  Foreign 
Dividends 
Returns  shall  be  required  regardless  of  the  amount. of 
payment  (1)  in  the  case  of  payments  of  interest  upon 
bonds  and  mortgages  or  deeds  of  trust  or  other  similar 
obligations  of  corporations,  joint  stock  companies,  asso- 
ciations and  insurance  companies,  and  (2)  in  the  case  of 
collections  of  items  of  interest  upon  the  bonds  of  foreign 
countries  and  interest  from  bonds  or  the  stock  of  foreign 
corporations  by  persons,  corporations,  partnerships  or 
associations  undertaking  as  a  matter  of  business  or  for 
profit,  the  collection  of  foreign  payments  of  such  interest 
or  dividends  by  means  of  coupons,  checks  or  bills  of 
exchange.     (Sec.  1211.) 

Disclosure  of  Ownership 

The  name  and  address  of  the  recipient  of  the  income 
must  be  furnished  on  demand  of  the  person  paying  the 
income.     (Sec.  1211.) 

Penalty 

Penalty  for  refusal  or  neglect  to  make  return  or  supply 
information  is  fine  of  not  less  than  $20  and  not  more  than 
$1,000. 

Any  individual  or  officer  of  a  corporation  who  makes  any 
false  or  fraudulent  return  or  statement  with  intent  to 
defeat  or  evade  the  assessment  of  taxes  shall  be  fined  not 
exceeding  $2,000,  or  be  imprisoned  not  exceeding  one 
year,  or  both.     (Sec,  1209.) 

[17] 


COLLECTION  OF  FOREIGN  ITEMS 

Persons,  firms,  corporations  or  associations  making 
collection  of  foreign  payments  of  interest  or  dividends  by 
means  of  coupons,  checks  or  bills  of  exchange,  are  required 
to  obtain  a  license  from  the  Commissioner  of  Internal 
Revenue.  Any  concern  that  undertakes  to  collect  such 
payments  without  having  obtained  a  license  therefor 
shall  be  subject  to  a  fine  not  exceeding  $5,000  or  imprison- 
ment for  a  term  not  exceeding  one  year,  or  both.  This 
requirement  is  the  same  as  that  in  effect  before  collection 
of  the  tax  at  the  source  was  abolished. 

LIFE  INSURANCE  PREMIUMS 

Premiums  paid  on  life  insurance  policies  covering  the 
lives  of  officers,  employes,  or  those  financially  interested 
in  any  trade  or  business  conducted  by  an  individual, 
partnership  or  corporation  shall  not  be  deducted  in  com- 
puting the  net  income  of  such  individual,  partnership  or 
corporation.     {Sec,  1211.) 


F18] 


War  Excess  Profits  Tax 


DEFINITIONS 

"Corporation"  includes  joint  stock  companies  or  asso- 
ciations and  insurance  companies. 

"Domestic"  means  created  under  the  laws  of  the  United 
States,  or  of  any  State,  Territory  or  District  thereof. 

"Foreign"  means  created  under  the  laws  of  any  other 
possession  of  the  United  States  or  of  any  foreign  country 
or  government. 

"United  States"  means  only  the  States,  the  Territories 
of  Alaska  and  Hawaii,  and  the  District  of  Columbia. 

"Taxable  Year"  means  the  twelve  months  ending 
December  thirty-first,  excepting  in  the  case  of  a  cor- 
poration or  partnership  which  has  fixed  its  own  fiscal 
year,  in  which  case  it  means  such  fiscal  year. 

"First  Taxable  Year"  shall  be  the  year  ending  Decem- 
ber thirty-first,  nineteen  hundred  and  seventeen,  except 
that  in  the  case  of  a  corporation  or  partnership  which 
has  fixed  its  own  fiscal  year,  it  shall  be  the  fiscal  year 
ending  during  the  calendar  year,  nineteen  hundred  and 
seventeen. 

"Pre- War  Period"  means  the  calendar  years  nineteen 
hundred  and  eleven,  nineteen  hundred  and  twelve  and 
nineteen  hundred  and  thirteen,  or,  if  a  corporation  or 
partnership  was  not  in  existence  or  an  individual  was 
not  engaged  in  a  trade  or  business  during  the  whole  of 
such  period,  then,  as  many  of  such  years  during  the 
whole  of  which  the  corporation  or  partnership  was  in. 

[19] 


existence  or  the  individual  was  engaged  in  the  trade  or 
business. 

*Net  Income,"  in  the  case  of  a  foreign  Corporation  or 
Partnership  or  a  non-resident  alien  individual,  means 
net  income  received  from  sources  within  the  United 
States. 


PERSONS,  CORPORATIONS  AND  PARTNERSHIPS 
SUBJECT  TO  TAX 

The  Tax,  which  is  in  addition  to  taxes  under  previously 
existing  laws  not  hereby  repealed  (page  34),  is  assessed 
on  the  excess  profits  of  corporations  and  partnerships, 
both  domestic  and  foreign,  and  of  individuals,  residents 
or  citizens  of  the  United  States,  and  non-resident  aliens, 
with  respect  to  their  trades  and  businesses.  For  the 
purpose  of  this  tax,  a  corporation  or  partnership  is 
deemed  to  be  in  but  one  trade  or  business  and  all  income 
is  deemed  to  be  received  from  such  trade  or  business. 
(Sec.  201.) 

The  Law  applies  to  all  trades  or  businesses  of  whatever 
description,  including  professions  and  occupations, 
whether  carried  on  continuously  or  not,  except: 

1.  In  the  case  of  oflScers  and  employes  under  the  United 
States,  or  any  State,  Territory,  or  the  District  of 
Columbia,  or  any  local  subdivision  thereof,  the  com- 
pensation or  fees  received  by  them  as  such  oflBcers 
or  employes.     {Sec,  201.) 

2.  Income  derived  from  the  business  of  life,  health  and 
accident  insurance  combined  in  one  policy  issued  on 
the  weekly  premium  payment  plan.     (Sec.  201.) 

120] 


CORPORATIONS,  PARTNERSHIPS,  AND 
INDIVIDUALS  EXEMPT  FROM  TAX 

1.  Foreign  Corporations  or  Partnerships  or  Non- 
resident Alien  Individuals,  the  net  income  of  whose 
trade  or  business  during  the  taxable  year  from  som'ces 
within  the  United  States  is  less  than  $3,000.   {Sec.  202.) 

2.  Corporations  exempt  from  the  Federal  Income  Tax 
and  Partnerships  and  Individuals  engaged  in  the 
same  business  or  coming  within  the  same  description. 
{Sec,  201.) 

DETERMINATION  OF  EXCESS  PROFITS 

For  the  purpose  of  the  determination  of  excess  profits, 
corporations,  partnerships  and  individuals  may,  for 
convenience,  be  divided  into  four  classes : 

Class  I.  Corporations  or  Partnerships  in  existence 
or  individuals  engaged  in  business  during  the  whole  of 
any  one  calendar  year  during  the  pre-war  period  shall 
determine  their  excess  profits  as  follows:    {Sec,  203.) 

Domestic  Corporations 

In  the  case  of  a  domestic  corporation  by  deducting  from 
net  income,  the  sum  of  (1)  an  amount  equal  to  the  same 
percentage  of  the  invested  capital  for  the  taxable  year, 
which  the  average  amount  of  the  annual  net  income  of 
the  trade  or  business  during  the  pre-war  period  was  of 
the  invested  capital  for  the  pre-war  period,  and  (2) 
$3,000.     {Sec.  203-a.) 

For  Example:  A  corporation,  having  average  capital  invested 
during  the  pre-war  period,  amounting  to  $100,000  and  an 
average  net  income  for  such  period,  amounting  to  $7,000, 
would  be  entitled  to  a  deduction  of  7%  of  its  invested  capital 
for  the  taxable  year,  plus  the  specific  exemption  of  $3,000,  in 
determining  excess  profits  for  the  taxable  year. 

1211 


Domestic  Partner  ships  and  Citizens  or  Residents   of  the 
United  States 

In  the  case  of  a  domestic  partnership  or  a  citizen  or 
resident  of  the  United  States,  by  deducting  from  net 
income  the  same  percentage  of  invested  capital  as  in  the 
case  of  a  domestic  corporation  but  the  specific  exemption 
allowed  shall  be  $6,000  instead  of  $3,000,  as  in  the  case 
of  a  corporation.     {Sec.  203-b.) 

Foreign  Corporations  and  Partnerships  and  Non-Resident 
Aliens 

In  the  case  of  a  foreign  corporation  or  partnership  or 
a  non-resident  alien  individual,  the  tax  shall  be  based 
on  the  income  received  from  sources  within  the  United 
States,  and  the  deduction  shall  be  an  amount  equal  to 
the  same  percentage  of  the  invested  capital  for  the 
taxable  year  which  the  average  net  income  received 
from  sources  within  the  United  States  during  the  pre- 
war period  was  of  the  average  invested  capital  during 
the  pre-war  period.     {Sec,  203-c.) 

Invested  capital  shall  be  that  proportion  of  the  entire 
invested  capital  which  the  net  income  from  the  trade  or 
business  within  the  United  States  bears  to  the  entire 
net  income.     {Sec.  207.) 

Limitation  on  Deductions 

The  foregoing  deduction  shall  be  an  amount  not  less 
than  seven  per  centum  nor  more  than  nine  per  centum 
of  the  invested  capital  for  the  taxable  year.     {Sec.  203.) 

Inability  to  Determine  Pre-War  Income 

If  the  Secretary  of  the  Treasury  is  unable  to  determine 
the  average  net  income  for  the  pre-war  period,  the  war 
profits  shall  be  determined  by  the  method  prescribed 
for  Class  III,  page  24.     {Sec.  203.) 

[22] 


Class    II.     Corporations    or    Partnerships    not    in 

EXISTENCE,  AND  INDIVIDUALS  NOT  ENGAGED  IN  BUSINESS, 
DURING  THE  WHOLE  OF  ANY  ONE  CALENDAR  YEAR  DURING 
THE  PRE-WAR  PERIOD,  SHALL  DETERMINE  THEIR  EXCESS 

PROFITS  AS  follows: 

Corporations 

In  the  case  of  corporations,  by  deducting  from  net  in- 
come 8%  of  the  invested  capital  for  the  taxable  year, 
plus  $3,000,  in  the  case  of  a  domestic  corporation. 
(Sec.  204.) 

For  Example:  A  corporation,  having  invested  capital  for  the 
taxable  year  1917  amounting  to  $200,000,  will  be  entitled  to  a 
deduction  of  8%  of  $200,000  plus  $3,000,  namely  a  deduction 
of  $19,000. 

Partnerships  and  Individuals 

In  the  case  of  a  partnership  or  an  individual,  by  deduct- 
ing from  net  income,  8%  of  the  invested  capital  for 
the  taxable  year,  plus  $6,000,  in  the  case  of  a  domestic 
partnership  or  resident  or  citizen  of  the  United  States. 
(Sec,  204.) 

Business  a  Continuation  of  Former  Business 

A  corporation  or  partnership,  although  formerly  organ- 
ized on  or  after  January  2,  1913,  which  is  substantially 
a  continuation  of  a  trade  or  business  carried  on  prior 
to  that  date,  shall  be  deemed  to  have  been  in  existence 
prior  to  that  date  and  the  net  income  and  invested 
capital  of  its  predecessor  for  the  pre-war  period  shall 
be  deemed  to  have  been  its  net  income  and  invested 
capital.     (Sec,  204.) 


[231 


Class  III.  Corporations,  Partnerships  and  Individu- 
als HAVING  NO  ENCX)ME,  OR  HAVING  A  SUBNORMAL 
INCOME,  DURING  THE  PRE-WAR  PERIOD,  SHALL  DETERMINE 
THEIR   EXCESS  PROFITS  AS  FOLLOWS: 

If  the  Secretary  of  the  Treasury,  upon  complaint,  finds 
that  during  the  pre-war  period,  a  domestic  corporation 
or  partnership  or  a  resident  or  citizen  of  the  United 
States,  had  no  income  or  had  income  which  was  low  as 
compared  with  representative  concerns  engaged  in  alike 
business,  by  deducting  from  the  net  income  for  the 
taxable  year,  the  sum  of  (1)  an  amount  equal  to  the 
same  percentage  of  its  invested  capital,  for  the  taxable 
year,  as  the  average  deduction  (determined  in  the  same 
manner  as  provided  for  in  Class  I  without  including  the 
exemption  of  $3,000  or  $6,000)  for  the  taxable  year  of 
representative  concerns  engaged  in  like  business,  is  of 
their  invested  capital  for  such  year,  and  (2),  in  the  case 
of  domestic  corporations,  $3,000  or,  in  the  case  of 
domestic  partnerships,  or  citizens  or  residents  of  the 
United  States,  $6,000.     (Sec.  205.a.) 

Determination  by  Commissioner 

The  percentage  of  the  deduction  to  invested  capital 
in  each  trade  or  business  taxable  under  Class  III  shall 
be  determined  by  the  Commissioner  of  Internal  Revenue 
under  regulations  prescribed  by  him.  In  the  case  of  a 
corporation  or  partnership  which  has  fixed  its  own  fiscal 
year  as  the  taxable  year,  the  percentage  determined  for 
the  calendar  year  ending  during  such  fiscal  year  shall 
be  used  as  the  basis.     {Sec,  205-a.) 

Procedure  for  Assessment  Under  Class  III 

The  law  provides  that  corporations,  partnerships  and 
individuals  coming  within  the  provisions  of  Class  III, 
shall  be  assessed  in  the  same  manner  as  provided  for 
corporations,  partnerships  or  individuals  under  Class  I. 
The  benefit  of  the  basis  of  assessment  provided  under 

[24] 


Class  III  may  be  claimed  only  by  filing  with  the  Collec- 
tor of  Internal  Revenue  at  the  time  of  filing  return  for 
the  assessment  of  the  tax,  claim  for  abatement  (Form  47) 
of  the  amount  by  which  the  tax  assessed  under  Class  I, 
exceeds  the  tax  computed  upon  the  basis  of  assessment 
provided  for  under  Class  III.     {Sec.  205-b.) 

For  Example:  If  A.  B.  C,  Inc.,  had  an  average  pre-war 
income  of  $7,000  and  average  invested  capital  for  the  pre-war 
period  of  $100,000,  the  percentage  of  the  invested  capital  for  the 
taxable  year  allowed  as  a  deduction,  if  assessed  upon  the  basis 
of  a  corporation  falling  within  Class  I,  would  be  7%. 

If  upon  determination  by  the  Commissioner  of  Internal 
Revenue  it  is  found  that  the  average  percentage  of  deduction 
of  representative  concerns  engaged  in  like  business  was  9%, 
the  corporation,  if  assessed  upon  the  basis  of  a  corporation 
falling  under  Class  III,  would  be  entitled  to  a  deduction 
amounting  to  9%  of  its  invested  capital. 

In  order  to  receive  the  benefit  of  the  latter  deduction,  A.  B. 
C,  Inc.,  will  file  a  return  showing  the  amount  of  tax  due  assessed 
on  the  basis  of  the  7%  deduction.  At  the  same  time  this  return 
is  filed,  a  claim  for  the  difference  in  tax  assessed  on  the  basis 
of  7%  and  that  assessed  on  the  basis  of  9%  will  be  filed  on 
Form  47. 

Where  claim  for  abatement  is  filed,  collection  of  the  amount 
of  the  tax  covered  by  the  claim  in  abatement  will  not  be  made 
until  a  decision  is  rendered  on  the  merits  of  the  claim.  If, 
however,  the  Commissioner  of  Internal  Revenue  deems  it 
advisable,  he  may  require  bond  for  the  payment  of  such  tax, 
and  if  such  bond  is  not  furnished  as  required,  demand  payment 
of  the  full  amount  of  the  tax  assessed.  If  the  full  amount  is 
collected  and  the  decision  on  the  claim  for  abatement  shows 
an  amount  overpaid,  such  excess  payment  will  bo  refunded. 
{Sec.  205.) 

Class  IV.  Corporations,  Partnerships,  or  Individ- 
uals, IN  CASES  WHERE  THE  SECRETARY  OF  TREASURY 
CANNOT  SATISFACTORILY  DETERMINE  INVESTED  CAPITAL, 
SHALL  DETERMINE  THEIR  EXCESS  PROFITS  AS  FOLLOWS: 

{Sec.  210.) 

The  taxable  war  profits  shall  be  determined  by  deducting 
from  the  net  income  for  the  taxable  year  the  sum  of  (1) 

[25] 


an  amount  equal  to  the  same  proportion  of  the  net  in- 
come of  the  trade  or  business  received  during  the 
taxable  year  as  the  average  deduction  (determined  in 
the  same  manner  as  provided  in  case  of  concerns  falling 
under  Class  I,  without  including  the  $3,000  or  $6,000 
specific  exemption)  for  the  same  calendar  year  of  repre- 
sentative concerns  engaged  in  same  business,  bears  to 
the  total  net  income  of  the  business  received  by  such 
concerns  and  (2)  in  the  case  of  a  domestic  corporation, 
$3,000,  or  in  the  case  of  domestic  partnership,  or  a  citizen 
or  resident  of  the  United  States,  $6,000. 

Determination  by  Commissioner 

The  proportion  between  the  deduction  of  the  net  in- 
come in  each  trade  or  business  shall  be  determined  by 
the  Commissioner  of  Internal  Revenue.  In  case  of  a 
corporation  or  partnership  which  has  fixed  its  own  fiscal 
year,  the  proportion  determined  for  the  calendar  year 
ending  during  such  fiscal  year,  shall  be  used. 


INVESTED  CAPITAL  DEFINED 

Domestic  Corporations  and  Partnerships 

In  the  case  of  a  corporation  or  partnership,  invested  capi- 
tal shall  include: 

1.  Actual  cash  paid  in. 

2.  Actual  cash  value  of  tangible  property  paid  in  otlier 
than  cash,  for  stock  or  shares  in  such  corporation  or 
partnership,  at  the  time  of  such  payment  (but  in  case 
such  tangible  property  was  paid  in  prior  to  January  1, 
1914,  the  actual  cash  value  of  such  property  as  of 

[261 


January  1,  1914,  but  in  no  case  to  exceed  the  par 
value  of  stock  issued  therefor),  and 

3.  Paid  in  or  earned  surplus  and  undivided  profits, 
used  or  employed  in  the  business  exclusive  of  undi- 
vided profits  earned  during  the  taxable  year.  (Sec, 
207.) 

Patents  and  Copyrights 

The  actual  cash  value  of  patents  and  copyrights  paid 
in  for  stock  or  shares  of  a  corporation  orjjartnership  at 
the  time  of  such  payment,  not  to  exceed  the  par  value 
of  such  stock  or  shares,  shall  be  included  as  invested 
capital.     (Sec,  207.) 

Intangible  Assets 

Good  will,  trade  marks,  trade  brands,  franchises  or 
other  intangible  property,  shall  be  included  as  invested 
capital  of  a  corporation  or  partnership,  if  bona  fide 
payment  therefor  was  made  in  cash  or  tangible  property. 
The  value  included  shall  not  exceed  the  actual  cash 
or  actual  cash  value  of  the  tangible  property  paid 
therefor  at  the  time  of  payment. 

Good  will,  trade  marks,  trade  brands,  franchises,  or 
other  intangible  property,  bona  fide  purchased  prior 
to  March  3,  1917,  for  and  with  interests  or  shares  in  a 
partnership,  or  in  the  capital  stock  of  the  corporation 
(issued  prior  to  March  3,  1917),  in  an  amount  not  to 
exceed  on  March  3,  1917,  20  per  centum  of  the  total 
shares  of  the  stock  of  the  corporation,  shall  be  included 
in  invested  capital.  Such  value,  however,  shall  not 
exceed  the  actual  cash  value  at  the  time  of  purchase, 
and  in  the  case  of  the  issue  of  stock,  shall  not  exceed  the 
par  value  of  such  stock.     (Sec.  207.) 

[27] 


Residents  or  Citizens  of  the  United  States 

In  the  case  of  individuals,  residents  or  citizens  of  the 
United  States,  invested  capital  shall  include: 

1.  Actual  cash  paid  into  the  trade  or  business; 

2.  Actual  cash  value  of  tangible  property  paid  into  the 
trade  or  business,  other  than  cash,  at  the  time  of  such 
payment  (but  in  case  such  tangible  property  was 
paid  in  prior  to  January  1, 1914,  the  actual  cash  value 
of  such  property  as  of  January  1, 1914) ;  and 

3.  The  actual  cash  value  of  patents,  copyrights,  good 
will,  trade  marks,  trade  brands,  franchises,  or  other 
intangible  property  paid  into  the  trade  or  business  at 
the  time  of  such  payment,  if  payment  was  made 
therefor  specifically  as  such  in  cash  or  tangible  prop- 
erty, not  to  exceed  the  actual  cash  or  actual  cash 
value  of  the  tangible  property  bona  fide  paid  there- 
for at  the  time  of  such  payment.     {Sec,  207.) 

Foreign  Corporations  and  Partnerships  and  Non-Resident 
Aliens 

In  the  case  of  foreign  corporations  and  partnerships  and 
non-resident  aliens,  invested  capital  shall  be  that  pro- 
portion of  the  actual  invested  capital,  as  defined  above, 
which  the  net  income  from  sources  within  the  United 
States  bears  to  the  entire  net  income.     (Sec.  207.) 

Monthly  Average 

Invested  capital  for  any  year  means  the  average  in- 
vested capital  for  the  year,  averaged  monthly.   {Sec.  207.) 

Capital  Excluded 

Invested  capital  does  not  include  stocks,  bonds  (other 
than  United  States  Bonds),  or  other  obligations,  the 

[28] 


income  from  which  is  not  subject  to  the  Excess  Profits 
Tax.  Likewise  it  does  not  include  money  or  other 
property  borrowed.     {Sec.  207.) 

Reorganization,  Consolidation,  or  Change  of  Ovmership  of 
Business 

In  the  case  of  the  reorganization,  consolidation  or 
change  of  ownership  of  a  business  after  March  3,  1917, 
if  an  interest  of  fifty  per  centum  or  more  remains  in  the 
control  of  the  same  persons,  partnerships,  or  corpora- 
tions, or  any  of  them,  no  asset  transferred  or  received 
from  the  prior  business  shall  be  allowed  a  greater  value 
than  would  have  been  allowed  such  prior  business,  in 
determining  invested  capital,  unless  such  asset  was 
paid  for  in  cash  or  tangible  property,  in  which  case 
the  amount  shall  not  exceed  the  actual  cash  or  the 
actual  cash  value  of  the  tangible  property  paid  therefor 
at  the  time  of  payment.     (Sec,  208.) 


RATES  OF  TAX 

The  tax  shall  be  collected  on  percentages  of  the  net 
income  as  follows :   (Sec.  201.) 

Rate 

Net  Income  (in  excess  of  deduction)  and  not  in 
excess  of  15%  of  the  invested  capital  for  the 
taxable  year 20% 

Net  income  in  excess  of  15%  but  not  in  excess  of 
20%  of  invested  capital 25% 

Net  income  in  excess  of  20%  but  not  in  excess  of 
of  25%  of  invested  capital 35% 

Net  income  in  excess  of  25%  but  not  in  excess  of 
33%  of  invested  capital 45% 

Net  income  in  excess  of  33%  of  invested  capital 60% 

[291 


BUSINESS   OR  TRADE   WITHOUT   CAPITAL   OR 
MERELY  NOMINAL  CAPITAL 

In  addition  to  other  taxes,  a  business  or  trade  having 
no  invested  capital  or  merely  a  nominal  invested  capital, 
shall,  in  lieu  of  the  excess  profits  tax,  pay  a  tax  of  8%  on 
income  derived  from  such  trade  or  business  in  excess  of 
$3,000,  in  the  case  of  a  domestic  corporation,  or  of  $6,000 
in  the  case  of  a  citizen  or  resident  of  the  United  States,  or  a 
domestic  partnership.     (Sec.  209.) 


NET  INCOME 


Corporations 


Net   income   of    a   corporation    shall    be    determined 
as  follows:     (Sec.  206.) 

For  the  years  1911  and  1912,  upon  the  basis  provided 
for  under  the  Corporation  Excise  Tax  Law,  Section  38, 
Act  of  Congress,  approved  August  5,  1909,  except  that 
income  taxes  paid  to  the  United  States  within  such 
years  shall  be  included.  This  makes  the  amounts  of  net 
income  returned  to  the  Treasury  Department  for  the 
years  of  1911  and  1912,  for  the  purpose  of  the  assessment 
of  the  Corporation  Excise  Tax,  plus  income  taxes  paid 
to  the  United  States,  the  basis  of  the  pre-war  income  for 
the  years  of  1911  and  1912. 

For  the  year  1913,  upon  the  basis  provided  for  under 
the  Income  Tax  Law,  Act  of  Congress,  approved  Octo- 
ber 3,  1913  (net  income  as  shown  on  the  Income  Tax 
Return  filed  for  year  1913),  except  that  income  taxes 
paid  to  the  United  States  shall  be  included  and  that 
dividends  from  stock  of  other  corporations  whose  net 
earnings  were  subject  to  tax  under  the  Act  of  October  3, 
1913,  received  by  the  corporation,  shall  be  deducted. 

[30] 


For  the  taxable  year,  upon  the  basis  provided  for 
under  the  Income  Tax  Law  of  September  8,  1916,  as 
amended,  except  that  dividends  from  stock  of  other 
corporations,  whose  net  earnings  are  subject  to  tax 
under  the  Act  of  September  8,  1916,  as  amended,  re- 
ceived by  the  corporation,  shall  be  deducted. 

Partnerships  and  Individuals 

Net  income  of  a  partnership  or  individual  for  the  pre- 
war period  and  taxable  year,  shall  be  determined  upon 
the  basis  provided  for  under  the  Income  Tax  Law  of 
September  8,  1916,  as  amended,  except  that  the  amount 
received  as  dividends  from  the  stock  of  any  domestic 
corporations,  whose  net  income  is  subject  to  tax  under 
the  Act  of  September  8,  1916,  as  amended,  shall  be  de- 
ducted.    {Sec,  206.) 

Deductions  Allowed  Partnerships 

Domestic  Partnerships 

Domestic  partnerships  shall  be  entitled  to  the  following 
deductions  from  gross  income  (allowed  under  Section  5, 
Subdivision  (a)  of  the  Act  of  September  8,  1916,  as 
amended),  in  computing  net  income: 

1.  Necessary  expenses  actually  paid  in  carrying  on  the 
business  or  trade. 

2.  Interest  paid  within  the  year  on  indebtedness,  except 
on  indebtedness  incurred  in  the  purchase  of  obliga- 
tions or  securities,  the  interest  upon  which  is  exempt 
from  taxation  as  income. 

3.  Taxes  paid  within  the  year,  other  than  those  as- 
sessed against  local  benefits,  and  excess  profits  and 
income  taxes. 

[31] 


4.  Losses  actually  sustained  during  the  year  incurred 
in  the  business  or  trade  arising  from  fires,  storms, 
shipwrecks  or  other  casualty  or  from  theft,  when 
not  compensated  for  by  insurance  or  otherwise. 

5.  Debts  actually  ascertained  to  be  worthless  and 
charged  off  within  the  year. 

6.  A  reasonable  allowance  for  exhaustion,  wear  and 
tear  of  property  within  the  Unite^J  States  arising 
out  of  its  use  or  employment  in  the  l^siness  or  trade; 
(a)  in  the  case  of  oil  and  gas  wqIIs,  a  reasonable 
allowance  for  actual  reduction  in  flow  and  produc- 
tion to  be  ascertained  by  the  settled  production  or 
regular  flow;  (b)  in  the  case  of  mines,  a  reasonable 
allowance  for  depletion  thereof  not  to  exceed  the 
market  value  in  the  mine  of  the  product  thereof 
which  has  been  mined  and  sold  during  the  year  for 
which  the  return  and  computation  are  made. 


Foreign  Partnerships 

Foreign  partnerships  shall  be  entitled  to  the  following 
deductions  (allowed  under  Section  6,  Subdivision  (a)  of 
the  Act  of  September  8,  1916,  as  amended)  from  gross 
income  in  computing  net  income: 

1.  Necessary  expenses  actually  paid  in  carrying  on  any 
business  or  trade  conducted  within  the  United  States. 

2.  The  proportion  of  all  interest  paid  within  the  year  on 
indebtedness  which  the  gross  amount  of  income  for 
the  year  derived  from  sources  within  the  United 
States  bears  to  the  entire  net  income. 


32] 


3.  Taxes  paid  within  the  year  imposed  under  the 
authority  of  the  United  States,  or  its  territories  or 
possessions,  or  under  the  authority  of  any  State  or 
subdivision  of  any  State,  not  including  those  as- 
sessed against  local  benefits  or  excess  profits  or 
income  taxes. 

4.  Losses  actually  sustained  during  the  year  incurred 
in  business  or  trade  conducted  within  the  United 
States,  and  losses  of  property  within  the  United 
States  arising  from  fires,  storms,  shipwrecks,  or 
other  casualty  and  from  theft,  when  such  losses  are 
not  compensated  for  by  insurance  or  otherwise. 

5.  Debts  arising  in  the  course  of  business  or  trade 
conducted  within  the  United  States,  actually  ascer- 
tained to  be  worthless  and  charged  off  within  the 
year. 

6.  A  reasonable  allowance  for  exhaustion,  wear  and 
tear  of  property  within  the  United  States  arising 
out  of  its  use  or  employment  in  the  business  or 
trade;  (a)  in  the  case  of  oil  and  gas  wells,  a  reasonable 
allow^ance  for  actual  reduction  in  flow  and  produc- 
tion to  be  ascertained  by  the  settled  production  or 
regular  flow;  (b)  in  the  case  of  mines,  a  reasonable 
allowance  for  depletion  thereof  not  to  exceed  the 
market  value  in  the  mine  of  the  product  thereof, 
which  has  been  mined  and  sold  during  the  year  for 
which  the  return  and  computation  are  made. 

RETURNS 

Partnerships.  Every  foreign  partnership  having  a  net 
income  of  $3,000  or  more  for  the  taxable  year,  and 
every  domestic  partnership  having  a  net  income  of 

[33] 


$6,000  or  more  for  the  taxable  year,  must  file  a  return  of 
the  income  of  the  trade  or  business  for  the  taxable  year, 
setting  forth  specifically  the  gross  income  for  the  year 
and  the  deductions  permitted  under  the  law.  {Sec, 
211.) 

The  return  shall  be  filed  in  the  form  prescribed  by  tlie 
Commissioner  of  Internal  Revenue  on  or  before  March 
1  of  each  year  for  the  preceding  calendar  year,  with  the 
Collector  of  Internal  Revenue  for  the  district  in  which 
the  oflSce  of  the  partnership  or  individual  is  located, 
or  in  which  the  individual  resides.  (Act  September  8, 
1916.) 

Fixing  Fiscal  Year.     A  corporation  or  partnership  may 
fix  its  own  fiscal  year  as  the  taxable  year.     {Sec,  200.) 

If  a  corporation  or  partnership  prior  to  March  1, 
1918,  makes  a  return  covering  its  own  fiscal  year,  and 
includes  therein  the  income  received  during  that  part 
of  the  fiscal  year  falling  within  the  year  1916,  the  tax 
for  the  year  1917  shall  be  that  proportion  of  the  tax 
computed  upon  the  excess  profits  during  such  fiscal 
year  which  the  time  from  January  1,  1917,  to  the  end 
of  such  fiscal  year,  bears  to  the  full  fiscal  year.   {Sec,  200.) 


TAX  LAW  REPEALED 

The  Excess  Profits  Tax  Law,  Title  2,  Act  of  March  3, 
1917,  is  repealed. 

Any  amount  which  has  been  or  hereafter  may  be  paid 
on  account  of  the  tax  as  imposed  under  the  excess  profits 
tax  law  of  March  3,  1917,  shall  be  credited  toward  the  pay- 
ment of  the  tax  imposed  by  this  law,  but  if  the  amount  so 
paid  exceeds  the  amount  due  under  this  law,  the  excess 
shall  be  refunded.  {Sec.  214.) 


[34] 


REGULATIONS    OF    THE    COMMISSIONER    OF 
INTERNAL  REVENUE 

The  Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury,  is  authorized  to 
make  all  necessary  regulations  for  carrying  out  provisions 
of  this  law  and  may  require  the  production  of  facts  and 
data  necessary  for  the  collection  of  the  tax.     (Sec.  213.) 

ADMINISTRATIVE  AND  GENERAL  PROVISIONS 
OF  THE  LAW 

All  administrative,  special  and  general  provisions  of 
the  law,  including  the  laws  in  reJation  to  the  assessment, 
remission,  collection  and  refund  of  internal  revenue  taxes 
not  inconsistent  with  the  provisions  of  this  law,  and  like- 
wise all  provisions  of  the  Income  Tax  Law  relating  to 
returns  and  payment  of  the  tax  imposed,  including  pro- 
visions relating  to  penalties,  are  made  applicable  to  taxes 
required  by  this  law.     (Sec.  212.) 


[3.5] 


*  Facilities  Furnished  by  Public  Utilities 

(Effective  November  1,  1917) 

TAX 

Express 

From  point  in  U.  S.  to  another  in  U.  S.     (Sec,  500.) 

— per  each  20c.  paid  therefor  $ .  01 

Freight 

From  point  in  U.  S.  to  another  in  U.  S.     {Sec, 
500.) — on  amount  paid  therefor  3% 

*Note:     Tax  imposed  hereunder: 

(1)  Shall  be  paid  by  peraon  pajang  for  service.  (Sec. 
501.) 

(2)  On  Transportation,  shall  be  paid  by  carrier  who 
ships  own  property  for  which  no  pay  is  received,  the  same 
as  if  transportation  charges  were  received,  to  be  deter- 
mined on  basis  of  tariff  of  other  carriers,  if  carrier  who 
receives  transportation  has  no  tariff  on  file  on  May  1, 
1917.     (Sec.  501.) 

Shall  not  be  applicable  to  transportation  of  commodi- 
ties necessary  for  the  use  of  the  carrier  in  the  conduct  of 
its  business;  or  to  transportation  of  company  material 
transported  by  one  carrier,  which  constitutes  a  part  of  the 
railroad  system,  for  another  carrier  which  is  also  a  part 
of  the  same  system.  (Sec.  501.) 

(3)  Shall  not  be  applicable  to  service  rendered  to  the 
United  States  or  any  State,  Territory  or  the  District  of 
Columbia,  the  right  to  exemption  to  be  evidenced  in 
such  manner  as  the  Commissioner  of  Internal  Revenue 
may  prescribe.     (Sec.  502.) 

(4)  Shall  be  collected,  and  paid  to  the  Collector  of 
Internal  Revenue,  by  person  or  corporation  receiving 
payment  for  service,  under  regulations  prescribed  by  the 
Commissioner  of  Internal  Revenue  in  accordance  with 
monthly  returns  filed  in  duplicate  by  such  person  or 
corporation.     (Sec.  503.) 

(36] 


fPASSENGER  FaRES  TAX 

From  point  in  U.  S.  to  another  or  to  any  point 
in  Canada  or  Mexico,  exclusive  of  commutation 
tickets  or  season  tickets  less  than  30  miles,  or 
transportation  costing  not  to  exceed  85c,  {Sec, 
500.) — on  amount  paid  therefor  8% 

Pipe  Line 

For  the  transportation  of  oil  by  pipe  line  (Sec, 
500.) — on  amount  paid  therefor  5% 

fSEATS,  Berths  or  Stateroom  Tickets,  in  Sleeping 
or  Parlor  Cars  or  on  Vessels  (Sec.  500.) — on 
amount  paid  therefor  10% 

Telegraph,  Telephone  or  Radio  dispatches  and 
messages,  originating  within  the  U.  S.,  each  mes- 
sage or  dispatch  of  15c.  or  more.  (Only  one 
payment  required  on  each).  (Sec.  500.) — on 
amount  paid  therefor  $.05 

fTickets,  not  partially  used,  or  mileage  books  purchased 
prior  to  November  1,  1917,  and  fares  paid  by  cash  on  train,  are 
subject  to  tax  and  tax  will  be  collected  by  conductor  or  agent 
to  whom  presented.  (Sec.  500.) 


[S7] 


Beverages'* 


Existing       War       Total 
Tax  Tax        Tax 

Ale  (See  Fermented  Liquors),  per  bbl.  $1.50     $1.50  $3.00 

Beer  (See  Fermented  Liquors),  per  bbl.  1.50       1.50    3.00 

Carbonic  Acid  Gas,  in  drums  or  other  con- 
tainers intended  for  use  in  manufacture  of 
carbonated  water  and  soft  drinks,  per  lb.; 
(SecSU):  .05 

Tax  shall  be  paid  by  purchaser  to  vendor  and  by  him 
returned  and  paid  to  U.  S. 

Champagnes  {See  Wines) 

Cordials  and  Liqueurs,  per  each  one- 
half  pint;  (Sec,  309):  .01 J  .Ol|  .03 
*NoTEs:  Manufacturers,  producers,  bottlers  or 
importers  are  required  to  make  monthly  returns 
to  the  Collector  of  Internal  Revenue  for  the  dis- 
trict in  which  are  located  their  principal  places 
of  business,  containing  information  necessary  for 
the  assessment  of  taxes.     (Sec.  314.) 

Commissioner  of  Internal  Revenue  is  author- 
ized to  discontinue  use  of  the  following  stamps: 
Distillery  warehouse,  special  bonded  warehouse, 
special  bonded  re-warehouse,  general  bonded 
warehouse,  general  bonded  retransfer,  transfer 
brandy,  export  tobacco,  export  cigars,  export 
oleomargarine,  and  export  fermented  liquor 
stamps.     (Sec.  305.) 

Unless  otherwise  stated,  taxes  are  effective 
October  4,  1917,  the  day  following  the  enact- 
ment of  the  law.     (Sec.  1302.) 

The  installation  of  meters,  tanks,  pipes  or 
other  apparatus  by  distilleries,  etc.  may  be  re- 
quired by  the  Commissioner  of  Internal  Revenue 
for  the  purpose  of  protecting  the  revenue.  In- 
stallation shall  be  at  the  expense  of  the  distillery 
and,  the  business  shall  be  discontinued  in  case 
of  refusal  or  neglect  to  make  such  installation. 
(Sec.  306.) 

[38] 


Existing       War       Total 
Tax  Tax         Tax 

Cordials  and  Liqueurs  in  excess  of  25  gallons, 
upon  which  existing  tax  has  been  paid,  held 
for  sale  on  October  3,  1917;  per  each  one- 
half  pint;     {Sec,  310):  $.0l| 

Distilled  Spirits 

In  bond,  produced,  or  imported  per  proof 

gal.,  or  per  wine  gal.  when  below  proof, 

(fractional  parts  proportionately) ;  (Sec. SOO) : 
For  other  than  beverage  purposes  $1.10      1.10  $2.20 

For  beverage  purposes  1.10      2.10    3.20 

Spirits  in  excess  of  50  gals,  held  for  sale  by 

retailers,  on  October  3,  1917,  upon  which 

existing  tax  has  been  paid,  per  gal.  (frac- 
tional parts  proportionately)  ;  (Sec.  303) : 

For  other  than  beverage  purposes  1.10 

For  beverage  purposes  2.10 

Spirits  held  for  sale  on  October  3, 1917,  by 

others  than  retailers  (except  in  custody  of 

court  of  bankruptcy) — per  gal.   (fractional 

parts  proportionately);     (Sec,  303): 
For  other  than  beverage  purposes  1.10 

For  beverage  purposes  2.10 

Spirits  for  beverage  purposes,  shall  not  be  imported 
into  the  U.  S.  from  any  foreign  country,  the  West 
Indian  Islands  acquired  from  Denmark  (unless  pro- 
duced from  products  grown  therein),  Porto  Rico  or 
the  Philippines.     (Sec.  301.) 

Packages  may  be  filled  or  spirits  transferred  after  pay- 
ment of  tax,  without  being  entered  in  bonded  warehouse, 
under  regulations  prescribed  by  the  Commissioner  of 
Internal  Revenue.     (Sec.  302.) 

Tax  on  spirits  in  the  custody  of  a  court  of  bank- 
ruptcy on  June  1,  1917,  shall  be  paid  by  the  person  to 
whom  the  court  delivers  same,  at  the  time  of  delivery,  to 
the  extent  that  the  amount  delivered  exceeds  50  gals. 
(Sec.  303.) 

The  manufacture,  warehousing,  withdrawal  and  ship- 
ment of  ethyl  alcohol  for  domestic  use,  or  for  denatura- 
tion,  and  denatured  alcohol,  may  be  exempted  from 
the  prohibition  against  Sunday  operations,  under  pre- 
scribed regulations;  and,  similarly,  manufacturers  there- 
of, for  other  than  beverage  purposes,  may  be  granted 
permission  to  fill  fermenting  tubs  in  a  sweet  mash  dis- 
tillery not  oftener  than  once  in  forty-eight  hours. 
(Sec.  303.) 

[39  J 


Existing       War       Total 
Tax  Tax         Tax 

Extracts  (See  Syrups  and  Extracts) 

Fermented  Liquors  | 

Beer,  lager  beer,  ale,  porter,  and  similar 

fermented  liquors  (containing  }4%  or  more 

alcohol),  per  bbl.  containing  not  in  excess  of 

31  gallons  and  at  a  like  rate  for  any  other 

quantity  or  fractional  parts;     (Sec,  S07):      $1.50     $1.50  $3.00 

Taxable  fermented  liquors  may  be  removed  without 
.  ayment  of  tax  from  brewery  to  contiguous  industriar 
distillery  to  be  used  as  distilling  material,  and  residue. 


payment  of  tax  from  brewery  to  contiguous  industrial 
distilleiy  to  be  used  as  distilling  material,  and  residue, 
containing  less  than  i%  alcohol,  which  is  to  be  used 


in  making  beverages,  may  be  manipulated  on  distillery 
premises  or  elsewhere.  Removal  is  subject  to  regula- 
tions of  the  Commissioner  of  Internal  Revenue.  (See. 
308.) 

Grape  Brandt  or  Wine  Spirits 

Withdrawn  for  the  fortification  of  sweet 
wine,  per  proof  gal.  (fractional  parts  propor- 
tionately); (Sec.  311):  .10  .20  .30 
Used  in  the  fortification  of  sweet  wines 
held  for  sale  October  3,  1917,  per  proof 
gallon  (fractional  parts  proportionately); 
(SecSn):  .10 
Withdrawn  for  the  purpose  of  fortifying 
sweet  wines,  but  not  used  prior  to  October 
3,  1917,  per  proof  gallon  (fractional  parts 
proportionately);     (Sec.  Sl^):                                          .20 

Grape    Juice       (See    Unfermented    Grape 
Juice),  per  gal.  .01 

Ginger  Ale     (See  Unfermented  Grape  Juice) , 
per  gal.  .01 

Lager  Beer     (See  Fermented  Liquors),  per 

bbl.  1.50       1.50    3.00 

Liqueurs     (See  Cordials) 

Perfumes,    containing   distilled   spirits,    im- 
ported into  U.  S.,  per  wine  gal.  (fractional 

parts  proportionately) ;     (Sec.  SOO):  1.10 

Tax  to  be  collected  by  collector  of  customs  and  de- 
posited as  internal  revenue  collections. 

[40] 


EziBtiii«       War       Total 
Tax  Tax         Tax 

Pop     (See    Unfermented   Grape  Juice),    per 

gal.  $.01 

Porter     (See   Fermented   Liquors),  per  bbl.  $1.50       1.50  $3.00 

Rectified  Spirits  (in  possession  of  rectifier 
on  October  3,  1917,  or  thereafter  rectified) 
per  proof  gal.  (fractional  parts  proportion- 
ately);    (Sec.  S04>):  .15 

Does  not  apply  to   gin  produced    by   the    re-distilla- 
tion of   a   pure   spirit  over  juniper  berries  and  other 

aromatios;  nor  to  cordials  and  liqueurs  subject  to  tax 

under  Act  of  Sept.  8,  1916;  nor  to  certain  blends  of  wines 

and  whiskies.     (Sec.  304.) 

Violations  of  Sec.  304  punishable  by  fine  not  less  than 

$250  or  more  than  $1,000  or  imprisonment  not  more  than 
';  two  years,  together  with  assessment  of  double  the  tax 
I  evaded,  together  with  tax  to  be  collected  by  assessment 
'        or  on  any  bond  given.     (Sec.  304.) 

Exchange  of  wholesale  liquor  dealers'  stamps  for  stamps 

for  rectified  spirits  is  discontinued  unless  package  is  to 

be  broken  into  smaller  packages.     (Sec.  305.) 

Root  Beer     (See  Unfermented  Grape  Juice) 

per  gal.  .01 

Sarsaparilla  (See  Unfermented  Grape 
Juice)  per  gal.  .01 

Soft  Drinks  (See  Unfermented  Grape 
Juice)  per  gal.  .01 

Sweet  Wines     (See  Grape  Brandy) 

Strups  and  Extracts,  for  use  in  manufac- 
ture of  soft  drinks.     (Sec.  313-a) 

If  sold  for  not  more  than  $1.30  per  gal.  .05 

If  sold  for  more  than  $1.30  per  gal.  and 

not  for  more  than  $2.00  per  gal.  .08 

If  more  than  $2.00  per  gal.  and  not  more 

than  $3.00  per  gal.  .10 

If  more  than  $3.00  per  gal,  and  not  more 

than  $4.00  per  gal.,  per  gal.  .15 

If  more  than  $4.00  per  gal.  .20 

[41] 


Existing        War        Total 
Tax  Tax  Tax 

Unfermented  Grape  Juice,  soft  drinks,  arti- 
ficial mineral  waters  (not  carbonated),  and 
fermented  liquors  containing  less  than  J^ 
per  centum  of  alcohol,  sold  by  the  manufac- 
turer, producer  or  importer  in  bottles  or 
closed  containers,  and  ginger  ale,  root  beer, 
sarsaparilla,  pop  or  other  carbonated  waters 
or  beverages,  manufactured  or  sold  by  the 
manufacturer,  producer  or  importer  of  car- 
bonic acid  gas  used  in  carbonating  same, 
(Sec.  313-b)  per  gal.  ••01 

Vermuth     {See  Wines) 

Waters — natural,  mineral  or  table  waters, 
sold  in  bottles  or  other  closed  containers  at 
over  10c.  per  gal.     (Sec,  313)  per  gal.  .01 

Artificial  mineral  Water  (not  carbonated) 
or  Carbonated  Waters  (Sec.  813-b)  per 
gal.  .01 

Wines 

Still  wines*  (including  vermuth,  artificial 
o'.  imitation  wines  or  compounds  sold  as  ^ 

still  wine),  in  bond,  produced,  or  imported, 
per  wine  gallon  (fractional  parts  proportion- 
ately);    (Sec.  309): 

Containing  not  more  than  14  per  cent. 

alcohol  $.04         .04    $.08 

Containing  more  than  14  per  cent  alcohol 

and  not  more  than  21%  alcohol  .10         .10       .«0 

Containing   more    than    21%    and    not 

more  than  24%  alcohol  .25         .25       .50 

^Wineflover  24%  alcohol  olaaaed  as  distilled  tpirita  and 
taxed  acoordinsly. 

[42] 


Existing       War       Total 
Tax  Tax         Tax 

Still  Wines  in  excess  of  25  gals,  held  for  sale 
on  October  3,  1917,  upon  which  existing 
tax  has  been  paid,  per  wine  gallon  (frac- 
tional parts  proportionately);     (Sec.  810): 

Containing  not  more  than  14%  alcohol  $.04 

Containing  more  than  14%  alcohol 

and    not    more   than    21%    alcohol  .10 

Containing    more   than   21%    and    not 

more  than  24%  alcohol  .25 

Champagne  and  sparkling  wines,  in  bond, 
produced  or  imported  per  3^  pt.  or  fraction 
theredf    (Sec.  309)  $.03        .03    $.06 

Champagne  and  sparkling  wines  in  excess 
of  25  gals,  held  for  sale  on  October  3, 1917, 
upon  which  existing  tax  has  been  paid,  per 
^2  pt.  or  fraction  thereof     (Sec,  310)  .03 

Artificially  carbonated  wines  in  bond,  pro- 
duced or  imported,  per  J^  pt.  or  fraction 
thereof     (/Sec.  309)  .01^       .OlJ     .03 

Artificially  carbonated  wines  in  excess  of  25 
gals,  held  for  sale  on  October  3, 1917,  upon 
which  existing  tax  has  been  paid,  per  3^  pt 
or  fraction  thereof     (Sec.  310)  .01^ 


[431 


Cigars,  Cigarettes  and  Tobacco 

g-k  ^  /o        At\i\\  Existing       War        Total 

Cigars  {Sec,  400)  Tax  Tax         Tax 

Manufactured,  sold  or  removed  for  con- 
sumption. (Effective  30  daj's  after  passage 
of  this  Act.)     (Sec.  402): 

Weighing  not  more  than  3  lbs.  per  1,000; 

per  1,000  (iSec.  400-a)  %  .75     $  .25  $1.00 

Weighing  more  than  3  lbs.   per   1,000: 

Retailing  at  4c  each  or  more  but  not  more 

than  7c  each,  per  1,000  (Sec.  400-b)  3.00       1.00     4.00 

Retailing  at  more  than  7c  each  but  not 

more    than    15c    each    per    J, 000    (Sec. 

400-c)  3.00       3.00     6.00 

Retailing  at  more  than  15c  each  but  not 

more  than  20c  each  per  1,000  (Sec,  400-d)       3.00       5.00     8.00 

Retailing  at  more  than  20c  each   {Sec, 

400.e)  3.00       7.00  10.00 

Amount  in  excess  of  1,000  held  for  sale  on 

the  day  after  the  passage  of   this  Act, 

or  removed  from  factory  or  custom  house 

after  the  passage  of  this  Act  but  prior  to 

the  effective  date,  upon  which  the  existing 

tax  has  been  paid.  \Sec,  403) : 

Weighing  not  more  than  3  lbs.  per  1,000; 

per  1,000  .12^ 

Weighing   more  than  3   lbs.   per   1,000; 

Retailing  at  4c  or  more  but  not  more  than 

7c  each,  per  1,000  .50 

Retailing  at  more  than  7c  each,  but  not 

more  than  15c  each,  per  1,000  1.50 

Retailing  at  more  than  15c  each,  but  not 

more  than  20c  each,  per  1,000  2.50 

Retailing  at  more  than  20c  each  S.50 

The  word  "retail"  as  used  in  regard  to  cigars  means 
the  ordinary  retail,  price  of  a  single  ci^ar,  and  the 
Commissioner  of  Internal  Revenue  may  require  manu- 
facturers or  importers  to  affix  to  each  box  a  conspicu- 
ous label  indicating  by  letter  the  clause  and  section 
under  which  the  cigars  therein  contained  have  been 
tax-paid.     (Sec.  400.) 

[44] 


Existing         War        ToUl 
Tax  Tax  Tax 

Cigarette  Papers  and  Tubes  (Sec.  404) 

Papers  in  packages,  books  or  sets  containing: 
y        Over  25  papers  but  not  over  50  papers  $.005 

r       Over  50  papers  but  not  over  100  papers  .01 

I         More  than  100  papers,  for  each  100  papers 

or  fractional  part  thereof  .01 

Tubes — per  100  or  fraction  thereof  M 

Cigarettes*  (Sec.  400) 
Manufactured    in    or    imported    into    the 
United   States.     (EflFective   30   days   after 
passage  of  this  Act.)     (Sec,  402) : 

Weighing  not  more  than  3  lbs.  per  1,000, 
per  1,000  $1.25     $  .80     2.05 

Weighing  more  than  3  lbs.  per  1,000,  per 
I         1,000  {Sec.  400-f)  3.60       1.20     4.80 

Amount  in  excess  of  1,000  held  for  sale 
on  the  day  after  the  passage  of  this 
Act,  or  removed  from  factory  or  custom 
house  after  the  passage  of  this  Act  but 
prior  to  the  efiPective  date,  upon  which  the 
I  existing  tax  has  been  paid.  (Sec.  402) : 
i         Weighing  not  more  than  3  lbs.  per  1,000, 

per  1,000  .40 

i         Weighing    more   than  3  lbs.   per   1,000, 
I        per  1,000  .60 

Cigarettes  (including  small  cigars  weighing  not 
more  than  3  lbs.  per  1,000)  shall  be  put  up  in  pack- 
ages containing  5,  8,  10,  12,  15,  16,  20,  24,  40,  50,  80, 
or  100,  and  manufacturers  shall  affix  and  cancel  stamps 
denoting  payment  of  tax;  cigarettes  imported  shall  be 
stamped  and  stamps  cancelled,  in  addition  to  import 
stamps,  before  withdrawn.     (Sec.  400-f.) 

♦Between  the  dates  of  October  3,  1917,  and  Novem- 
ber 2,  1917,  all  cigarettes,  manufactured  tobacco  and 
snuff  may  be  put  up  in  either  the  packages  as 
provided  for  by  the  existing  law  or  as  provided  for 
m  this  Act.     (Sec.  402.) 

[45] 


Existing       War 
Tax  Tax 

Tobacco  and  Snuff*  (Sec.  401) 

Manufactured,  sold  or  removed  for  con- 
sumption. (Effective  30  days  after  passage 
of  this  Act.)     per  lb.  (Sec,  402)  $.08       $.05 

Amount  in  excess  of  100  lbs.  held  for  sale 
on  the  day  after  the  passage  of  this 
Act,  or  removed  from  factory  or  custom- 
house after  the  passage  of  this  Act  but 
prior  to  the  effective  date,  upon  which 
the  existing  tax  has  been  paid,  per  1,000 
(Sec.  403)  .02| 

In  addition  to  packages  now  provided  for  under 
existing  law,  tobacco  and  snuff  may  be  put  up  in  the 
followinK  wtee:  H,  H,  %,  H,  IH,  IH.  IH.  1^.  and 
5  ounces.     (Sec.   401.) 

♦Retwnen  the  dat«8  of  October  3,  ini7,  and 
Noverobet    2,    1017,    all     cigarettes,     nnanufa'^ttired  , 

tobai-co  and  .-^nuff  may  be  put  up  in  either  the  pack- 
ages as  provided  for  by  the  existing  law  or  as  pro- 
vided  for  in  this  Act.     (Sec.  402.) 


[46] 


Stamp  Taxes 

Under  Schedule  A* 


TAX 


Agreements  (See  Capital  Stock;  Produce). 
Bill  of  Sale  (See  Capital  Stock;  Produce). 

*NoTE :  Penalty  for  illegally  using,  removing,  buying* 
selling,  or  destroying  any  stamp,  die  plate  or  impres- 
sion thereof,  is  fine  not  to  exceed  $1,000  or  imprison- 
ment not  to  exceed  five  years,  or  both.     (Sec.  803.) 

Penalty  for  signing  or  issuing  any  instrument  or  other 
paper;  consigning  or  shipping  any  article  by  parcel 
post;  manufacturing,  importing  or  selling  any  playing 
cards  without  the  full  amount  of  tax  being  paid,  or 
using  an  adhesive  stamp  without  cancelling  it,  is  fine 
not  to  exceed  $100  for  each  offense.     (See.  802.) 

Person  using  stamps  shall  cancel  same  by  writing 
or  stamping  initials  of  name  and  date.     (Sec.  804.) 

Stamps  are  on  sale  by  several  collectors  of  internal 
revenue,  postmasters,  assistant  treasurers  and  desig- 
nated depositories  of  the  United  States.  (Sec.  806 
and  807.) 

Bonds,  notes  or  other  instruments  issued  by  the 
United  States  or  by  any  foreign  government  or  by  any 
State,  Territory,  or  the  District  of  Columbia,  or  local 
subdivision  thereof;  or  stocks  and  bonds  issued  by 
cooperative  building  and  loan  associations  operating 
exclusively  for  the  benefit  of  their  members  and  making 
loans  only  to  their  shareholders;  or  by  mutual  ditch 
or  irrigation  companies;  shall  not  be  subject  to  tax. 
(Sec.  801.) 

Laws  relating  to  the  assessment  and  collection  of 
taxes  are  extended  to  and  made  a  part  of  this  law  for 
the  purposes  of  collecting  stamp  taxes.     (Sec.  805.) 

Taxes  are  effective  on  and  after  December  1,  1917. 
(Sec.  800.) 

Bonds,  Debentures,  or  Certificates  of  Indebt- 
edness, issued  on  or  after  December  1,  1917, 
on  each  $100  or  fraction  of  amount  of  Bond.        $.05 

Renewals  are  taxed  aa  new  issues. 

When  bond  is  conditioned  for  payment  of  money  in  a  penal  sum 
greater  than  the  debt  secured,  the  tax  shall  be  on  the  amount 
seoured. 

[471 


TAX 

Bonds,  Indemnity  and  Surety  (except  in  legal 
proceedings  and  reinsurance) ,  (Sec.  2) ,  each  $ .  50 

Where  premium  is  charged  per  $1.00  premium 
or  fraction  .  01 

Capital  Stock,  Issue 

With  par  value,  each  $100  face  value  or  fraction  .  05 

Without  par  value,  actual  value   $100   or   less, 
each  share  .05 

Without  par  value,  actual  value  over  $100,  each 
$100  or  fraction  .05 

Stamps  to  be  attached  to  stock  boolcs. 

Capital  Stock,  sales  or  transfers  type. 

With  par  value,  each  $100  face  value  or  fraction      .09 
Without  par  value,  actual  value  $100  or  less,  each 
share  .02 

Without  par  value,  actual  value  in  excess  of  $100 
per  share,  each  $100  or  fraction  .02 

Deposit  of  certificates  as  collateral  not  taxable. 

Deliveries  to  brokers  for  sale  or  by  brokers  on  account  of 
purchase  not  taxable. 

Stamps  shall  be  affixed  to — a.  Transfer  books  where  shown 
only  on  books;  b.  Certificate  where  transfer  is  by  certificate; 
c.  Bill  of  sale  where  certificate  deUvered  in  blank. 

Penalty  for  violation:  fine  not  exceeding  $1,000.  imprisonment 
not  exceeding  6  months,  or  both. 

Certificates  of  Indebtedness  (See  Bonds  of  In- 
debtedness). 

Checks,  not  payable  at  sight  or  on  demand 
(See  Drafts  and  Checks). 

Conveyances  of  Real  Estate,  by  deed,  instru- 
ment, or  writing,  (not  to  secure  debt,)  on  considera- 
tion less  encumbrances  assumed  by  purchaser: 
Exceeding  $100,  not  in  excess  of  $500  .50 

Each  additional  $500  or  fraction  thereof  .50 

48] 


TAX 

Deeds  (See  Conveyances) 

Drafts  or  Checks  not  payable  at  sight  or  on  de- 
mand, per  each  $100  or  fraction  thereof  $ .  02 

Entry  of  Merchandise  at  Custom  House — on 
value  of  merchandise: 

Not  exceeding  $100  .25 

Exceeding  $100  and  not  exceeding  $500  .50 

Exceeding  $500  1.00 

Entry,  for  withdrawal  of  merchandise  from  customs 
bonded  warehouse  .50 

Memorandum  of  Sale  (See  Capital  Stock; Produce). 

Notes  (See  Promissory  Notes). 

Parcel  Post  Packages — for  each  25c  or  fraction 
for  transportation  charged  on  packages  upon 
which  the  charge  is  25c.  or  more,  to  be  paid  by 
consignor  .01 

No  package  shall  be  transported  unless  stamps  are  attached. 

Passage  Ticket,  one  way  or  round  trip  transpor- 
tation by  vessels  from  U.  S.  to  destination  not 
in  the  U.  S.,  Canada  or  Mexico: 

Not  exceedmg  $30  1.00 

Exceeding  $30  and  not  exceeding  $60  3.00 

Exceeding  $60  5.00 

Tickets  not  in  excess  of  $10 — exempt. 

Playing  Cards,  pack  containing  not  over  54  cards, 
in  addition  to  existing  tax  (Effective  October  3, 
1917)  .05 

Power  of  Attorney,  except  for  use  in  Government 
pension^,  or  in  bankruptcy  cases  .  25 

Promissory  Notes  (except  bank  notes  issued  for 
circulation),  and  each  renewal  of  the  same,  per 
each  $  1 00  or  fraction  thereof  .  02 

[49] 


TAX 

Produce,  sales  of,  on  exchange  on  each  $100  in 
value  or  fraction  thereof  $.02 

Stamps  shall  be  attached  to  bill  or  agreement  of  sale  which 
shall  show  date  of  sale,  name  of  seller,  amount  of  sale,  and  the 
matter  to  which  it  refers. 

Transfer  of  contracta  to  a  clearing  house  for  the  purpose  of  ad- 
justinj;  accounts,  provided  no  l)eneficial  interest  is  passed  to  such 
clearing  house,  is  not  subject  to  tax. 

Sales  for  immediate  deHvery  not  taxable. 

Penalty  for  violation:  fine  not  exceeding  $1,000,  or  imprison- 
ment not  exceeding  6  months,  or  both. 

Proxies,  except  for  use  in  religious,  educational, 
charitable,  fraternal  or  literary  societies  or 
public  cemeteries.  .10 

Sales  (See  Capital  Stock;  Conveyances;  Produce). 

Transfers   {See  Capital  Stock). 


[60] 


Estates 

The  amendment  to  the  Federal  estates  tax  law  materially 
increases  the  rates  of  tax.  All  other  provisions  of  the  law 
of  September  8,  1916,  as  amended  by  the  Act  of  March 
3,  1917,  remain  in  full  force  and  effect,  unchanged.  (Sec, 
900.) 

The  following  schedule  shows  the  rates  effective  on 
estates  of  decedents  dying  on  and  after  October  3,  1917. 

Net  Estate  after  Rate  of  Rate  of      Rate  of 

Specific  Exemption  Existing         Additional     Total  Amt.  of 

of  $25,000  Tax  Tax  Tax  Tax 

Next  $      50,000  1^%  ^%  2%  $      1,000 

100,000  3     %  1     %  4%  4,000 

100,000  4H%  13^%  6%  6,000 

200,000  6  %  2  %  8%  16,000 

550,000  73^%  23^%  10%  55,000 

"   1,000,000  9  %  3  %  12%  120,000 

"       1,000,000  10J^%  33^%  14%  140,000 

"       1,000,000  12     %  4     %  16%  160,000 

"       1,000,000  133^%  43^%  18%  180,000 

"       3,000,000  15     %  5     %  20%  600.000 

"       2,000,000  15     %  7     %  22%  440,000 

In  excess  of 

$10,000,000  15     %  10     %  25%        


The  additional  tax  imposed  shall  not  apply  to  the  trans- 
fer of  the  estate  of  a  decedent,  dying  wliile  serving  in  the 
military  or  naval  forces  of  the  United  States,  during  the 
war  in  which  the  United  States  is  now  engaged,  or  dying 
from  injuries  received  or  disease  contracted  in  the  service 
within  one  year  after  the  termination  of  the  war.  {Sec, 
901.) 


51] 


Manufactures 


TAX 


Taxes  on  following  articles  are  to  be  paid 

BY  users: 
Boats  (See  Yachts) 
Motor  Boats 

Not  over  5  net  tons  with  fixed  engines. 

(Sec.  603)  per  year        $5.00 

Over  5  net  tons    with  fixed  engines   {See 

Yachts) 

Yachts,  pleasure  boats,  power  boats,  motor 
boats  with  fixed  engines,  and  sailing  boats, 
of  over  5  net  tons,  not  used  exclusively  for 
trade  or  national  defense  nor  built  according 
to  plans  approved  by  the  Navy  Department 
(Sec.  603) 

*Length  not  over  50  feet,  per  foot  "       **  .50 

Length  over  50  feet,  not  over  100  feet,  per 
foot  "       "  1.00 

Length  over  100  feet,  per  foot  "       "  2.00 

♦In  determining  the  length,  the  measurement  over 
all  length  shall  govern. 

Note:  Tax  payable  by  user  on  day  Act 
takes  effect,  or  at  the  time  of  purchase  of  new 
boat,  and  thereafter  on  the  first  day  of  each  July. 

In  case  of  tax  on  boat  purchased  on  date  other 
than  July  1,  the  tax  shall  be  the  same  number 
of  twelfths  of  the  amount  as  the  remaining 
months  prior  to  the  following  July  1,  including 
the  month  in  which  purchased.     (Sec.  603.) 


[52 


TAX 

Taxes  on  following  akticles  are  to  be 
paid  by  the  manufacturer,  producer, 
OR  importer: 

Automobiles,  automobile  trucks,  automobile 
wagons,  and  motorcycles.  {Sec.  600),  on 
selling  price  3% 

Cameras  (Sec,  600)  on  selling  price  3% 

Chewing   Gum,  or  substitute  therefor   {Sec, 

600),  on  selling  price  2% 

Films,  Moving  picture,  unexposed  {Sec,  600), 

per  linear  foot  $.0025 

Films,  Moving  picture,  positive,  containing 
picture  ready  for  projection  {Sec,  600),  per 
linear  foot  .005 

Jewelry,  real  or  imitation  {Sec.  600),  on  sell- 
ing price  3% 

Note:  Tax  attaches  to  articles  sold  by  manu- 
facturer, producer  or  importer.  Each  manu- 
facturer, producer  or  importer  shall  make  monthly 
returns  and  pay  taxes  imposed  under  Section  600 
to  Collector  of  Internal  Revenue  for  District  in 
which  principal  place  of  business  is  located,  under 
regulations  prescribed  by  Commissioner  of  In- 
ternal Revenue.     (Sec.  601.) 

If  any  of  the  above  articles  named,  except  mov- 
ing picture  films,  are  held  for  sale  on  October  3, 
1917,  by  any  person  other  than  a  retailer,  who 
is  not  a  wholesaler,  or  the  manufacturer,  pro- 
ducer, or  importer,  a  tax,  equivalent  to  one-half 
of  the  above  rates,  shall  be  paid  by  the  person 
holding  same.  (Sec.  602.)  Such  person  shall 
make  return  and  pay  tax  within  30  days  after  the 
passage  of  this  Act.     (Sec.  1002.) 

Tax  does  not  attach  to  articles  sold  and  deliv- 
ered prior  to  May  9,  1917,  where  title  is  reserved 
in  vendor  as  security  for  payment  of  purchase 
price.     (Sec.  602.) 

[53] 


TAX 

Patent  Medicines,  pills,  tablets,  powders, 
tinctures,  troches,  or  lozenges,  syrups,  medi- 
cinal cordials  or  bitters,  anodynes,  tonics, 
plasters,  liniments,  salves,  ointments,  pastes, 
drops,  waters  (not  otherwise  taxed  under 
Section  813),  essences,  spirits,  oils  and  all 
medicinal  preparations,  compounds,  or  com- 
positions and  other  patent  or  proprietary 
medicines  or  remedies  {Sec,  600),  on  selling 
price  2% 

Piano  players,  graphophones,  phonographs 
and  talking  machines  {Sec,  600),  on  selling 
price  S% 

Records,  for  player  pianos,  graphophonea, 
phonographs,  talking  machines  or  musical 
instruments  {Sec,  600),  on  selling  price  S% 

Sporting  Goods  and  Games,  tennis  racquets, 
golf  clubs,  baseball  bats,  lacrosse  sticks, 
balls  of  all  kinds,  including  baseballs,  foot- 
balls, tennis,  golf,  lacrosse,  billiard,  and  pool 
balls,  fishing  rods,  reels  and  lines,  billiard 
and  pool  tables,  chess  and  checker  boards 
and  pieces,  dice,  games  and  parts  of  games 
except  playing  cards  and  children's  toys 
and  games  {Sec.  600),  on  selling  price  3% 

Toilet  Articles,  perfumes,  cosmetics, 
essences,  toilet  waters,  extracts,  vaselines, 
petroleums,  hair  oils,  pomades,  tooth  and 
month  washes,  dentrifices,  aromatic  cachous, 
tooth  pastes,  hair  restorers,  dj^es  and  dress- 
ings, toilet  soaps  and  powders  and  similar 
sul^stances  used  for  toilet  purposes  {Sec, 
600) ,  on  selling  price  2% 

[54] 


Insurance 

(Effective  November  1,  1917.) 


TAX 


Life  Insurance  (except  policies  for  reinsurance,  and 
except  Industrial  policies  of  $500  or  less  on  week- 
ly payment  plan,  upon  which  tax  shall  be  40%  of 
first  premium).  {Sec.  504) — per  $100  or  fraction 
thereof  of  policy  $.08 

Marine,  Inland  or  Fire  Insurance  (except  policies 
for  reinsurance).  (Sec.  504) — per  $1.00  or  fraction 
thereof  of  premium  .  0 1 

Casualty  Insurance  (except  life,  marine  and  fire, 
and  except  policies  for  reinsurance).  (Sec» 
504) — per  $1 .00  or  fraction  thereof  of  premium  .  0 1 

Note  :  All  policies  of  insurance  issued  by  a  person,  cor- 
poration or  organization,  exempt  from  Federal  Income 
Tax.  shall  be  exempt  from  taxes  imposed  by  this  law. 
(Sec.  504.) 

Persons  receiving  pay  for  issuing  insurance  policies 
shall  make  return  during  the  first  15  days  of  each  month 
and  pay  tax  to  Collector  of  Internal  Revenue.    (Sec.  505.) 


1551 


Admissions  to  Places  of  Amusements 

TAX 

Admissions  (EfiFective  November  1, 1917).  {Sec.  700.) 
Persons  over  12  years  paying  admission,  except 
where  maximum  charge  is  5c,  per  each  10c  or 
fraction.  $ .  01 

Persons,  admitted  free,  except  employees,  children 
under  twelve  years,  and  oflBcers  on  oflBcial  business, 
per  each  10c  charged  for  similar  admissions.  {Sec, 
700.)  .01 

Children  under  12  years,  where  admission  is 
charged — per  admission.     {Sec.  700.)  .01 

Cabarets  or  similar  entertainments  to  which  the 
charge  for  admission  is  wholly  or  in  part  included 
in  the  price  paid  for  refreshment,  service  or  mer- 
chandise, the  amount  to  be  computed  by  rules 
established  by  the  Commissioner  of  Internal 
Revenue,  per  each  10c  thereof  .  01 

Boxes  or  Seats,  for  permanent  use,  on  the  amount 
for  which  a  similar  box  or  seat  is  sold  for  per- 
formance at  which  the  box  or  seat  is  used  or 
reserved  10% 

Note:  No  tax  shall  be  levied  where  all  the  proceeds 
of  which  inure  to  the  benefit  of  religious,  educational,  or 
charitable  organizations  or  institutions,  or  admissions 
to  agricultural  fairs. 

No  tax  to  be  imposed  in  the  case  of  a  place  the 
maximum  charge  for  which  is  five  cents;  nor  in  the  case 
of  a  moving  picture  and  certain  other  shows  the 
maximum  charge  for  which  is  ten  cents;  nor  in  the  case 
of  admissions  to  outdoor  amusement  parks. 

Admission  includes  seats  and  tables,  reserved  or 
otherwise,  and  other  similar  accommodations,  and  the 
charges  made  therefor. 

Persons  or  organizations  receiving  payments  of  admis- 
sions, or  admitting  persons  free,  shall  collect  taxes  from 
persons  paying  admissions,  make  monthly  reports,  and 
pay  the  sums  collected  to  Collector  of  Intemsd  Revenue. 
(Sec.  702.) 

[66j 


Postal  Rates 

First  Class  Matter  (Effective  30  days  after 
passage  of  Act): 

Three  cents  per  ounce  or  fraction,  except  drop 
letters  of  first  class  2c  per  ounce  or  fraction. 
(Sec,  1100.) 

Postal  cards  or  private  mailing  cards  one  cent  in 
addition  to  existing  rate. 

Note:  During  the  present  war,  letters  written  and 
mailed  by  soldiers,  sailors  and  marines  while  assigned  to 
duty  in  a  foreign  country,  may  be  mailed  without 
postage. 

For  the  purpose  of  determining  the  rate  of  postage, 
publishers  are  required,  with  the  first  mailing  of  each 
issue,  to  file  with  the  postmaster  a  copy  of  such  issue 
together  with  a  statement  of  such  imformation  as  may 
be  prescribed  by  the  Postmaster  General. 

Second  Class  Matter 

On  Portion  of  Publication  Devoted  to  Adver- 
tising, in  cases  where  over  five  per  centum  of 
publication  is  devoted  to  advertising: 


July  1,  1918 

July  1,  1919 

July  1,  1920 

to 

to 

to 

On  and  after 

*Zone 

July  1,  1919 

July  1,  1920 

July  1,  1921 

July  1,  1921 

1st 

$.01^ 

$.013^ 

$.oi?i 

$.02 

2nd 

.OIK 

.013^ 

.01% 

.02 

3rd 

.013^ 

.02 

.023^ 

.03 

4tli 

.02 

.03 

.04 

.05 

5tli 

.02M 

.031^ 

.04?^ 

.06 

6th 

.02J^ 

.04 

.053^ 

.07 

7th 

.03 

.05 

.07 

.09 

8th 

.0314 

.053^ 

.07M 

.10 

""Zones  applicable  to  fourth  class  matter  applicable  to  second 
class  matter. 

[57] 


TAX 


On    Portion    of    Publication    Devoted    to 
Other  Than  Advertising: 


From  July  1,   1918,  to  July  1,  1919,  per  lb.  or 
fraction  $.01} 

On  and  after  July  1,  1919,  per  lb.  or  fraction  .01^ 

Note:  Daily  newspapers,  deposited  in  letter-carrier 
office  for  delivery  by  carrier,  are  subject  to  existing  rate. 
(Sec.  1102.) 

Existing  law  as  to  circulation  and  existing  rates  on 
second  class  matter  within  county  of  publication  not 
affected  by  increase  in  rates.     (Sec.  1102.) 

Newspapers  and  periodicals  maintained  by  and  in 
interest  of  religious,  educational,  scientific,  philanthropic, 
agricultural,  labor  and  fraternal  associations  not  for  profit 
(except  when  deposited  for  delivery  by  carrier,  in  which 
case  the  rates  provided  by  existing  law  shall  apply),  the 
rate,  irrespective  of  the  zone  in  which  delivered,  shall  be 
ij^  cents  per  pound  or  fraction  on  and  after  July  1, 
1918,  and  l}4  cents  per  pound  on  and  after  July  1,  1919 
(Sec.  1103.) 

Where  total  weight  of  any  one  edition  or  issue  m^led 
to  any  one  zone  does  not  exceed  one  pound,  the  rate 
shall  be  one  cent.     (Sec.  1104.) 

Zone  rates  herein  provided  for  relate  to  entire  bulk 
to  any  one  zone  and  not  to  individually  addressed  pack- 
ages.    (Sec.  1105.) 

Newspapers  mailed  by  other  than  publisher  or  his 
agent,  or  news  agent  or  dealer,  shall  be  charged  the  same 
postage  as  under  existing  law.     (Sec.  1106.) 


[58] 


Dues 


TAX 


Dues,  or  Membership  Fees,  in  social,  sporting,  or 
athletic  clubs  which  are  in  excess  of  $12.00  per 
year  (including  initiation  fees),  to  be  paid  by 
members.  (Effective  November  1,  1917.)  {Sec, 
701)  10% 

Note:  Persons  or  organizations  receiving  payments 
of  dues,  or  admitting  persons  free,  shall  make  monthly- 
reports  and  pay  taxes  to  Collector  of  Internal  Revenue. 
(Sec.  702.) 

Dues  to  fraternal  and  beneficial  societies  are  exempt. 
(Sec.  701.) 

Munitions  Tax 

Reduction  of  Rate 

The  munitions  tax  for  the  year  of  1917  is  reduced 
from  123^  per  centum  to  10  per  centum.  (Sec,  214.) 

Expiration  of  Tax 

The  Munitions   Tax  Law  shall    cease   to  be  of 
effect  on  and  after  January  1,  1918.     {Sec,  214.) 


[59] 


Administrative  and  General  Provisions 

West  Indian  Islands 

Articles  coming  into  U.  S.  from  West  Indian  Islands, 
acquired  from  Denmark,  shall  be  subject  to  tax  imposed 
on  like  articles  by  Internal  Revenue  Laws  of  U.  S.,  and 
exempt  from  tax  under  Internal  Revenue  Laws  of  Islands. 
(Sec,  1000.) 

Articles  shipped  from  U.  S.  to  West  Indian  Islands, 
acquired  from  Denmark,  shall  be  subject  to  tax  imposed 
on  like  articles  by  Internal  Revenue  Laws  of  Islands  and 
exempt  from  tax  under  Internal  Revenue  Laws  of  U.  S. 
{Sec,  1000.) 

Administrative  Provisions  of  Law  Applicable 

All  administrative,  special  and  stamp  provisions  of 
law,  including  the  law  relating  to  the  assessment  of  taxes, 
as  far  as  applicable,  are  made  a  part  of  this  Act.  (Sec. 
1001.) 

Records  and  Returns 

Every  person  liable  to  tax  or  for  the  collection  thereof 
shall  keep  such  records,  render  such  returns  and  comply 
with  such  regulations  as  the  Commissioner  of  Internal 
Revenue  may  prescribe.     (Sec.  1001.) 

Collection  and  Payment 

Where  additional  taxes  are  imposed  by  this  Act  upon 
articles  or  commodities,  upon  which  the  existing  tax  has 
been  paid,  the  person  required  to  pay  such  additional  tax 
shall  make  return  within  thirty  days  after  passage  of  this 
Law  in  accordance  with  regulations  promulgated  by  the 
Commissioner  of  Internal  Revenue.     (Sec,  1002.) 

Payment  of  the  additional  tax  may  be  extended  seven 
months  after  the  passage  of  this  Law,  with  the  approval 

[60j 


of,  and  under  regulations  prescribed  by,  the  Commissioner 
of  Internal  Revenue.     (Sec,  1002.) 

Where  the  method  of  collecting  the  tax  is  not  specifically 
provided,  such  tax  shall  be  collected  in  such  manner  as  the 
Commissioner  of  Internal  Revenue  may  prescribe.  (Sec. 
1003.) 

Where  tax  imposed  by  stamps  is  an  increase  over  exist- 
ing rates,  stamps  on  hand  in  collectors'  offices  or  Internal 
Revenue  Bureau,  may  be  used  until  supply  is  exhausted 
but  sold  at  the  increased  rates.     (Sec,  1006.) 

In  the  payment  of  any  tax  not  payable  by  stamps,  a 
fractional  part  of  a  cent  shall  be  disregarded  unless  it 
amounts  to  one-half  cent  or  more,  in  which  case  it  shall  be 
increased  to  one  cent.     (Sec,  1008.) 

Penalties 

Penalty  and  administrative  provisions  contained  in 
Title  VIII,  page  96  of  Law,  shall  apply  to  all  taxes  to  be 
paid  by  stamp.     (Sec,  1003.) 

Penalty  for: 

1  failure  to  make  returns, 

2  false  or  fraudulent  return, 

3  evasion  or  attempt  to  evade  tax, 

4  failure  to  collect,  account  for  or  pay  over  tax, 

is  fine  not  to  exceed  $1,000  or  imprisonment  not  to  exceed 
one  year,  or  both,  and,  in  addition  thereto,  a  penalty  of 
double  the  tax  evaded.     (Sec,  1004.) 

Stamps  on  Hand 

Assessment  shall  be  made  against  taxpayers  having 
stamps  on  hand  on  the  eflPective  day  of  this  Law,  for 
the  difference  between  the  prices  paid  and  increased  rate. 
(Sec,  1006.) 

[61 


Regulations  and  Rulings 

Commissioner  of  Internal  Revenue,  with  approval  of 
the  Secretary  of  the  Treasury,  is  authorized  to  make  all 
needful  regulations  for  enforcement  of  the  law.  {Sec. 
1005.) 

Tax  on  Contracts  Before  May  9,  1917 

If  a  bona  fide  contract  is  made  with  a  dealer  prior  to 
May  9,  1917,  for  the  sale  of  beverages,  cigars,  cigarettes, 
tobacco,  coffee,  tea,  sugar,  chocolate,  cocoa,  saccharine, 
molasses,  syrup,  automobiles,  cameras,  boats,  yachts, 
sporting  goods,  toilet  articles,  patent  medicines  and  play- 
ing cards  (or  in  the  case  of  moving  picture  films,  such  a 
contract  with  a  dealer  for  the  sale  or  lease  thereof),  after 
the  tax  thereon  takes  effect,  and  if  such  contract  does  not 
permit  the  adding  of  the  whole  tax  to  the  amount  to  be  paid 
under  the  contract,  the  vendee,  in  lieu  of  the  vendor,  shall 
pay  so  much  of  the  tax  as  is  not  permitted  to  be  added  to 
the  contract  price.  Such  taxes  shall  be  paid  to  the  ven- 
dor by  the  vendee,  at  the  time  the  sale  is  consummated, 
and  returned  and  paid  to  the  United  States  by  the 
vendor.     (Sec,  1007.) 

The  term  "dealer"  includes  a  vendee  who  purchases 
with  intent  to  use  the  article  in  the  manufacture  or  pro- 
duction of  another  article  intended  for  sale.     (Sec,  1007.) 

Payment  in  Advance 

Income  and  excess  profits  taxes  may  be  paid  in  advance, 
either  in  installments  or  in  full. 

Under  regulations  prescribed  by  the  Secretary  of  the 
Treasury,  taxpayers  hereunder  may  make  payment  in 
advance  in  installments  or  in  whole  of  an  amount  not 
in  excess  of  the  estimated  taxes  due  from  them.  One- 
fourth  of  the  tax  shall  be  paid  within  thirty  days,  at  least 
another  one-fourth  within  two  months,  and  additional  one- 
fourth  within  four  months  after  the  close  of  the  taxable 
162] 


year,  and  the  remainder  before  the  time  now  fixed  for  such 
payment.     {Sec.  1009.) 

Credit  of  interest  at  3%  may  be  allowed  on  the  advance 
installments,  calculated  from  the  date  of  payment  to  date 
when  due,  but  shall  not  be  allowed  on  payments  in  excess 
of  the  taxes  due  nor  when  made  after  four  and  one-half 
months  after  end  of  taxable  year. 

Payment  by  Uncertified  Checks 

Collectors  of  Internal  Revenue  are  authorized  to  receive 
uncertified  checks  in  payment  of  income  and  excess 
profits  taxes,  but  if  a  check  so  received  is  not  paid,  all 
penalties  shall  apply  in  the  same  manner  as  if  such  check 
had  not  been  tendered.     (Sec,  1010.) 

I     Provisions  Separable 

'  The  adjudgment  of  any  clause,  sentence,  paragraph  or 

part  of  this  law  to  be  invalid  shall  not  affect,  impair  or 
invalidate  the  remainder  of  the  law.     (Sec.  1300.) 

I      Effective  Date  of  Law 

I         Unless  otherwise  specifically  provided,  this  law  shall  take 
effect  on  the  day  following  its  passage.     {Sec.  1302.) 


[63] 


War  Tax  Law 


APPROVED  OCTOBER  3.  1917 


An  Act  to  provide  revenue  to  defray  war 
expenses,  and  for  other  purposes 

Be  it  enacted  by  the  Senate  and  House  of  Representa- 
tives of  the  United  States  of  America  in  Congress  assem- 
bled, 

Title  I— War  Income  Tax 

Section  1.  That  in  addition  to  the  normal  tax  im- 
posed by  subdivision  (a)  of  section  one  of  the  Act  entitled 
^*  An  Act  to  increase  the  revenue,  and  for  other  purposes, " 
approved  September  eighth,  nineteen  hundred  and  sixteen, 
there  shall  be  levied,  assessed,  collected,  and  paid  a  like 
normal  tax  of  two  per  centum  upon  the  income  of  every 
individual,  a  citizen  or  resident  of  the  United  States, 
received  in  the  calendar  year  nineteen  hundred  and  seven- 
teen and  every  calendar  year  thereafter. 

Sec.  2.  That  in  addition  to  the  additional  tax  imposed 
by  subdivision  (b)  of  section  one  of  such  Act  of  September 
eighth,  nineteen  hundred  and  sixteen,  there  shall  be  levied, 
assessed,  collected,  and  paid  a  like  additional  tax  upon  the 
income  of  every  individual  received  in  the  calendar  year 
nineteen  hundred  and  seventeen  and  every  calendar  year 
thereafter,  as  follows: 

One  per  centum  per  annum  upon  the  amount  by  which 
the  total  net  income  exceeds  $5,000  and  does  not  exceed 
$7,500; 

Two  per  centum  per  annum  upon  the  amount  by  which 
the  total  net  income  exceeds  $7,500  and  does  not  exceed 
$10,000; 

Three  per  centum  per  annum  upon  the  amount  by  which 
the  total  net  income  exceeds  $10,000  and  does  not  exceed 
$12,500; 

Four  per  centum  per  annum  upon  the  amount  by  which 
the  total  net  income  exceeds  $12,500  and  does  not  exceed 
$15,000; 

[651 


Surtax 


Five  per  centum  per  annum  upon  the  amount  by  which 
the  total  net  income  exceeds  $15,000  and  does  not  exceed 
$20,000; 

Seven  per  centum  per  annum  upon  the  amount  by 
which  the  total  net  income  exceeds  $20,000  and  does  not 
exceed  $40,000; 

Ten  per  centum  per  annum  upon  the  amount  by  which 
the  total  net  income  exceeds  $40,000  and  does  not  exceed 
$60,000: 

Fourteen  per  centum  per  annum  upon  the  amount  by 
which  the  total  net  income  exceeds  $60,000  and  does  not 
exceed  $80,000; 

Eighteen  per  centum  per  annum  upon  the  amount  by 
which  the  total  net  income  exceeds  $80,000  and  does  not 
exceed  $100,000; 

Twenty-two  per  centum  per  annum  upon  the  amount 
by  which  the  total  net  income  exceeds  $100,000  and  does 
not  exceed  $150,000; 

Twenty-five  per  centum  per  annum  upon  the  amount 
by  which  the  total  net  income  exceeds  $150,000  and  does 
not  exceed  $200,000; 

Thirty  per  centum  per  annum  upon  the  amount  by 
which  the  total  net  income  exceeds  $200,000  and  does  not 
exceed  $250,000; 

Thirty-four  per  centum  per  annum  upon  the  amount 
by  which  the  total  net  income  exceeds  $250,000  and  does 
not  exceed  $300,000; 

Thirty-seven  per  centum  per  annum  upon  the  amount 
bv  which  the  total  net  income  exceeds  $300,000  and  does 
not  exceed  $500,000; 

Forty  per  centum  per  annum  upon  the  amount  by  which 
the  total  net  income  exceeds  $500,000  and  does  not  exceed 
$750,000. 

Forty-five  per  centum  per  annum  upon  the  amount  by 
which  the  total  net  income  exceeds  $750,000  and  does  not 
exceed  $1,000,000. 

Fifty  per  centum  per  annum  upon  the  amount  by  which 
the  total  net  income  exceeds  $1,000,000. 

Sec.  3.  That  the  taxes  imposed  by  sections  one  and 
two  of  this  Act  shall  be  computed,  levied,  aff-sessed,  col- 
lected, and  paid  ui>on  the  same  basis  and  in  the  same 
mannrr  as  the  similar  taxes  imposed  by  section  one  of  such 
Act  of  September  eighth,  nineteen  hundred  and  sixteen, 
except  that  in  the  case  of  the  tax  imposed  by  section  one  of 

[66] 


Sp< 
Ex 


:emption 


DeductioH 
at  Source  of 
Additional 
Normal  Tax 


this  Act  (a)  the  exemptions  of  $3,000  and  $4,000  provided 
in  sertion  seven  of  such  Act  of  September  eighth,  nineteen 
hundred  and  sixteen,  as  amended  by  this  Act,  shall  be, 
respectively,  $1,000  and  $2,000,  and  (b)  the  returns  re- 
quired under  subdivisions  (b)  and  (c)  of  section  eight  of 
such  Act  as  amended  by  this  Act  shall  be  required  in  the 
case  of  net  incomes  of  $1,000  or  over,  in  the  case  of  un- 
married persons,  and  $2,000  or  over  in  the  case  of  married 
persons,  instead  of  $3,000  or  over,  as  therein  provided, 
and  (c)  the  provisions  of  subdivision  (c)  of  section  nine  of 
such  Act,  as  amended  by  this  Act,  requiring  the  normal 
tax  of  individuals  on  income  derived  from  interest  to  be 
deducted  and  withheld  at  the  source  of  the  income  shall 
not  apply  to  the  new  two  per  centum  normal  tax  prescribed 
in  section  one  of  this  Act  until  on  and  after  January  first, 
nineteen  hundred  and  eighteen,  and  thereafter  only  one 
two  per  centum  normal  tax  shall  be  deducted  and  withheld 
at  the  source  under  the  provisions  of  such  subdivision  (c), 
and  any  further  normal  tax  for  which  the  recipient  of 
such  income  is  liable  under  this  Act  or  such  Act  of  Sep- 
tember eighth,  nineteen  hundred  and  sixteen,  as  amended 
by  this  Act,  shall  be  paid  by  such  recipient. 

Sec.  4.  That  in  addition  to  the  tax  imposed  by  sub-  Corporations 
division  (a)  of  section  ten  of  such  Act  of  September  eighth, 
nineteen  hundred  and  sixteen,  as  amended  by  this  Act, 
there  shall  be  levied,  assessed,  collected,  and  paid  a  like  tax 
of  four  per  centum  upon  the  income  received  in  the  calen- 
dar year  nineteen  hundred  and  seventeen  and  every  Rate  of  Tax 
calendar  year  thereafter,  by  every  corporation,  joint-stock 
company  or  association,  or  insurance  company,  subject  to 
the  tax  imposed  by  that  subdivision  of  that  section,  except 
that  if  it  has  fixed  its  own  fiscal  year,  the  tax  imposed  by 
this  section  for  the  fiscal  year  ending  during  the  calendar 
year  nineteen  hundred  and  seventeen  shall  be  levied,  Fiscal  Year 
assessed,  collected,  and  paid  only  on  that  proportion  of  its 
income  for  such  fiscal  year  which  the  period  between 
January  first,  nineteen  hundred  and  seventeen,  and  the 
end  of  such  fiscal  year  bears  to  the  whole  of  such  fiscal 
year. 

The  tax  imposed  by  this  section  shall  be  computed,   Collection 
levied,  assessed,  collected,  and  paid  upon  the  same  incomes 
and  in  the  same  manner  as  the  tax  imposed  by  subdivision 
(a)  of  section  ten  of  such  Act  of  September  eighth,  nineteen 
hundred  and  sixteen,  as  amended  by  this  Act,  except  that 

(e7] 


for  the  purpose  of  the  tax  imposed  by  this  section  the  in- 
come embraced  in  a  return  of  a  corporation,  joint-stock 
company  or  association,  or  insurance  company,  shall  be 
credited  with  the  amount  received  as  dividends  upon 
the  stock  or  from  the  net  earnings  of  any  other  corpora- 
tion, joint-stock  company  or  association,  or  insurance 
company,  which  is  taxable  upon  its  net  income  as  provided 
in  this  title. 

Sec.  5.  That  the  provisions  of  this  title  shall  not 
extend  to  Porto  Rico  or  the  Philippine  Islands,  and  the 
Porto  Rican  or  Philippine  Legislature  shall  have  power 
by  due  enactment  to  amend,  alter,  modify,  or  repeal  the 
income  tax  laws  in  force  in  Porto  Rico  or  the  Philippine 
Islands,  respectively. 


Title  II— War  Excess  Profits  Tax 

Sec.  200.  That  when  used  in  this  title — the  term  "Cor- 
poration" includes  joint-stock  companies  or  associations 
and  insurance  companies;  the  term  "Domestic"  means 
created  under  the  law  of  the  United  States,  or  of  any 
state,  territory,  or  district  thereof,  and  the  term  "Foreign" 
means  created  under  the  law  of  any  other  possession  of 
the  United  States  or  of  any  foreign  country  or  government; 
the  term  "United  States"  means  only  the  States,  the  Ter- 
ritories of  Alaska  and  Hawaii,  and  the  District  of  Columbia; 
the  term  "Taxable  Year"  means  the  twelve  months 
ending  December  thirty-first,  excepting  in  the  case  of  a 
corporation  or  partnership  which  has  fixed  its  own  fiscal 
year,  in  which  case  it  means  such  fiscal  year.  The  first 
taxanle  year  shall  be  the  vear  ending  December  thirty- 
first,  nineteen  hundred  and  seventeen,  except  that  in  the 
case  of  a  corporation  or  partnership  which  has  fixed  its 
own  fiscal  year,  it  shall  be  the  fiscal  year  ending  during 
the  calendar  year  nineteen  hundred  and  seventeen.  If  a 
corporation  or  partnership,  prior  to  March  first,  nineteen 
hundred  and  eighteen,  makes  a  return  covering  its  own 
fiscal  year,  and  includes  therein  the  income  received  during 
that  part  of  the  fiscal  year  falling  within  the  calendar 
year  nineteen  hundred  and  sixteen,  the  tax  for  such  tax- 
able year  shall  be  that  proportion  of  the  tax  computed 
upon  the  net  income  during  such  full  fiscal  year  which 
the  time  from  January  first,  nineteen  hundred  and  seven- 
teen, to  the  end  of  such  fiscal  year  bears  to  the  full  fiscal 

[68] 


year;  and  the  term  "Pre- War  Period"  means  the  calendar  Pre- War 
years  nineteen  hundred  and  eleven,  nineteen  hundred  and  Period 
twelve,  and  nineteen  hundred  and  thirteen,  or,  if  a  cor- 
poration or  partnership  was  not  in  existence  or  an  indi- 
vidual was  not  engaged  in  a  trade  or  business  during 
the  whole  of  such  period,  then  as  many  of  such  years 
during  the  whole  of  which  the  corporation  or  partnership 
was  in  existence  or  the  individual  was  engaged  in  the 
trade  or  business. 

The  terms  " Trade '^  and  "Business"  include  professions  Trade 
and  occupations.  Business 

The  term  "Net  Income"  means  in  the  case  of  a  foreign 
corporation  or  partnership  or  a  nonresident  alien  individual.   Net  Incomr 
the  net  income  received  from  sources  within  the  United 
States. 

Sec.  201.  That  in  addition  to  the  taxes  under  exist-  Rates  of  Tax 
ing  law  and  under  this  Act  there  shall  be  levied,  assessed, 
collected  and  paid  for  each  taxable  year  upon  the  income 
of  every  corporation^  partnership,  or  individual,  a  tax 
(hereinafter  in  this  title  referred  to  as  the  tax)  equal  to 
the  following  percentages  of  the  net  income: 

Twenty  per  centum  of  the  amount  of  the  net  income  in 
excess  of  the  deduction  (determined  as  hereinafter  pro- 
vided) and  not  in  excess  of  fifteen  per  centum  of  the  in- 
vested capital  for  the  taxable  year;  twenty-five  per  centum 
of  the  amount  of  the  net  income  in  excess  of  fifteen  per 
centum  and  not  in  excess  of  twenty  per  centum  of  such 
capital;  thirty-five  per  centum  of  the  amount  of  the  net 
income  in  excess  of  twenty  per  centum  and  not  in  excess  : 

of  twenty-five  per  centum  of  such  capital;    forty-five  per  | 

centum  of  the  amount  of  the  net  income  in  excess  of  | 

twenty-five  per  centum  and  not  in  excess  of  thirty-three 
per  centum  of  such  capital;     and     sixty  per  centum  of  i 

the  amount  of  the  net  income  in  excess  of  thirty-three 
per  centum  of  such  capital. 

For  the  purpose  of  this  title  every  corporation  or  part- 
nership not  exempt  under  the  provisions  of  this  section  Trade  or 
shall  be  deemed  to  be  engaged  in  business,  and  all  the  Business  of 
trades  and  businesses  in  which  it  is  engaged  shall  be  treated  Corporation 
as  a  single  trade  or  business,  and  all  its  income  from  or  Partner- 
whatever  source  derived  shall  be  deemed  to  be  received  s^ip 
from  such  trade  or  business. 


[69] 


This  title  shall  apply  to  all  trades  or  businesses  of  what- 
ever description,  whether  continuously  carried  on  or  not, 
except — (a)  In  the  case  of  officers  and  employees  under 
the  United  States,  or  any  State,  Territory,  or  the  District 
of  Columbia,  or  any  local  subdivision  thereof,  the  com- 
pensation or  fees  received  by  them  as  such  officers  or  em- 
ployees; (b)  Corporations  exempt  from  tax  under  the 
provisions  of  section  eleven  of  Title  I  of  such  Act  of  Sep- 
tember eighth,  nineteen  hundred  and  sixteen,  as  amended 
by  this  Act,  and  partnerships  and  individuals  carrying 
on  or  doing  the  same  business,  or  coming  within  the  same 
description;  and  (c)  Incomes  derived  from  the  business 
of  life,  health,  and  accident  insurance  combined  in  one 
policy  ifeued  on  the  weekly  premium  payment  plan. 

Sec.  202.  That  the  tax  shall  not  be  imposed  in  the 
case  of  the  trade  or  business  of  a  foreign  corporation  or 
partnership  or  a  nonresident  alien  individual,  the  net 
mcome  of  which  trade  or  business  during  the  taxable 
year  is  less  than  $3,000. 

Sec.  203.  That  for  the  purposes  of  this  title  the  de- 
duction shall  be  as  follows,  except  as  otherwise  in  this 
title  provided — (a)  In  the  case  of  a  domestic  corpora- 
tion, the  sum  of  (1)  an  amount  equal  to  the  same  per- 
centage of  the  invested  capital  for  the  taxable  year  which 
the  average  amount  of  the  annual  net  income  of  the  trade 
or  business  during  the  pre-war  period  was  of  the  invested 
capital  for  the  pre-war  period  (but  not  less  than  seven  or 
more  than  nine  per  centum  of  the  invested  capital  for  the 
taxable  year),  and  (2)  $3,000;  (b)  In  the  case  of  a  do- 
mestic partnership  or  of  a  citizen  or  resident  of  the  United 
States,  the  sum  of  (1)  an  amount  equal  to  the  same  per- 
centage of  the  invested  capital  for  the  taxable  year  which 
the  average  amount  of  the  annual  net  income  of  the  trade 
or  business  during  the  pre-war  period  was  of  the  invested 
capital  for  the  pre-war  period  (but  not  less  than  seven 
or  more  than  nine  per  centum  of  the  invested  capital  for 
the  taxable  year),  and  (2)  $6,000;  (c)  In  the  case  of  a 
foreign  corporation  or  partnership  or  of  a  nonresident 
alien  individual,  an  amount  ascertained  in  the  same 
manner  as  provided  in  subdivisions  (a)  and  (b),  without 
any  exemption  of  $3,000  or  $6,000;  (d)  If  the  Secretary 
of  the  Treasury  is  unable  satisfactorily  to  determine  the 
average  amount  of  the  annual  net  income  of  the  trade  or 
business  during  the  pre-war  period,  the  deduction  shall  be 
determined  in  the  same  manner  as  provided  in  section 
two  hundred  and  five. 

[70] 


Sec.  204.  That  if  a  corporation  or  partnership  was 
not  in  existence,  or  an  individual  was  not  engaged  in  the 
trade  or  business,  during  the  whole  of  any  one  calendar 
year  during  the  pre-war  period,  the  deduction  shall  be  an 
amount  equal  to  eight  per  centum  of  the  invested  capital 
for  the  taxable  year,  plus  in  the  case  of  a  domestic  corpora- 
tion $3,000,  and  in  the  case  of  a  domestic  partnership 
or  a  citizen  or  resident  of  the  United  States,   $6,000. 

A  trade  or  business  carried  on  by  a  corporation,  part- 
nership, or  individual,  although  formally  organized  or 
reorganized  on  or  after  January  second,  nineteen  hundred 
and  thirteen,  which  is  substantially  a  continuation  of  a 
trade  or  business  carried  on  prior  to  that  date,  shall,  for 
the  purpose  of  this  title,  be  deemed  to  have  been  in  exist- 
ence prior  to  that  date,  and  the  net  income  and  invested 
capital  of  its  predecessor  prior  to  that  date  shall  be  deemed 
to  have  been  its  net  income  and  invested  capital. 

Sec.  205.  (a)  That  if  the  Secretary  of  the  Treasury, 
upon  complaint  finds  either  (1)  that  (kiring  the  pre- 
war period  a  domestic  corporation  or  partnership, 
or  a  citizen  or  resident  of  the  United  States,  had 
no  net  income  from  the  trade  or  business,  or  (2)  that  dur- 
ing the  pre-war  period  the  percentage,  which  the  net 
income  was  of  the  invested  capital,  was  low  as  compared 
with  the  percentage,  which  the  net  income  during  such 
period  of  representative  corporations,  partnerships,  and 
individuals,  engaged  in  a  like  or  similar  trade  or  business, 
was  of  their  invested  capital,  then  the  deduction  shall  be 
the  sum  of  (1)  an  amount  equal  to  the  same  percentage 
of  its  invested  capital  for  the  taxable  year  which  the  average 
deduction  (determined  in  the  same  manner  as  provided 
in  section  two  hundred  and  three,  without  including  the 
$3,000  or  $6,000  therein  referred  to)  for  such  year  of 
representative  corporations,  partnerships,  or  individuals, 
engaged  in  a  like  or  similar  trade  or  business,  is  of  their 
average  invested  capital  for  such  year,  plus  (2)  in  the  case 
of  a  domestic  corporation  $3,000,  and  in  the  case  of  a 
domestic  partnership  or  a  citizen  or  resident  of  the  United 
States,  $6,000. 

The  percentage  which  the  net  income  was  of  the  in- 
vested capital  in  each  trade  or  business  shall  be  determined 
by  the  Commissioner  of  Internal  Revenue,  in  accordance 
with  regulations  prescribed  by  him,  with  the  approval  of 

[71] 


Deduction 

Determined, 

Concern  not 

Operating 

During 

Pre-War 

Period 


Deduction 

Determined, 

Concern 

having  no 

Pre-War 

Income  or 

Subnormal 

Pre-War 

Income 


Determina- 
tion of 
Percentage 


the  Secretary  of  the  Treasury.  In  the  case  of  a  corpora- 
tion or  partnership  which  has  fixed  its  own  fiscal  year, 
the  percentage  determined  for  the  calendar  year  ending 
during  such  fiscal  year  shall  be  used. 

(b)  The  tax  shall  be  assessed  upon  the  basis  of  the  de- 
claim for  duction  determined  as  provided  in  section  two  hundred 
Abatement  and  three,  but  the  taxpayer  claiming  the  benefit  of  this 
section  may  at  the  time  of  making  the  return  file  a  claim 
for  abatement  of  the  amount  by  which  the  tax  so  assessed 
exceeds  a  tax  computed  upon  the  basis  of  the  deduction 
determined  as  provided  in  section  two  hundred  and  three, 
but  the  taxpayer  claiming  the  benefit  of  this  section  may 
at  the  time  of  making  the  return  file  a  claim  for  abate- 
ment of  the  amount  by  which  the  tax  so  assessed  exceeds 
a  tax  computed  upon  the  basis  of  the  deduction  deter- 
mined as  provided  in  this  section.  In  such  event, 
collection  oi  the  part  of  the  tax  covered  by  such  claim  for 
abatement  shall  not  be  made  until  the  claim  is  decided, 
but  if  in  the  judgment  of  the  Commissioner  of  Internal 
Revenue,  the  interests  of  the  United  States  would  be 
jeopardized  thereby  he  may  require  the  claimant  to  give  a 
bond  in  such  amount  and  with  such  sureties  as  the  Com- 
missioner may  think  wise  to  safeguard  such  interests, 
conditioned  for  the  payment  of  any  tax  found  to  be  due, 
with  the  interest  thereon,  and  if  such  bond,  satisfactory 
to  the  Commissioner,  is  not  given  within  such  time  as  he 
prescribes,  the  full  amount  of  tax  assessed  shall  be  collected 
and  the  amount  overpaid,  if  any,  shall  upon  final  decision 
of  the  application,  be  refunded  as  a  tax  erroneously  or 
illegally  collected. 
Nel  income  Sec.  206.     That  for  the  purposes  of  this  title  the  net 

Determined  income  of  a  corporation  shall  be  ascertained  and  returned 
(a)  for  the  calendar  years  nineteen  hundred  and  eleven, 
Corporation  and  nineteen  hundred  and  twelve,  upon  the  same  basis 
and  in  the  same  manner  as  provided  in  section  thirty- 
ei^t  of  the  Act  entitled  "An  Act  to  Provide  Revenue, 
Equalize  Duties,  and  Encourage  the  Industries  of  the 
United  States,  and  for  Other  Purposes, "  approved  August 
fifth,  nineteen  hundred  and  nine,  except  that  income 
taxes  paid  by  it  within  the  year  imposed  by  the  authority 
of  the  United  States  shall  be  included;  (b)  for  the  calendar 
year  nineteen  hundred  and  thirteen  upon  the  same  basis 
and  in  the  same  manner  as  provided  in  section  II  of  the 
Act  entitled  "An  Act  to  Reduce  Tarifif  Duties  and  to 
Provide   Revenue  for  the   Government,   and   for  Other 

[72] 


Purposes,"  approved  October  third,  nineteen  hundred 
and  thirteen,  except  that  income  taxes  paid  by  it  within 
the  year  imposed  by  the  authority  of  the  United  States 
shall  be  included,  and  except  that  the  amounts  received 
by  it  as  dividends  upon  the  stock  or  from  the  net  earnings 
of  other  corporations,  joint-stock  companies  or  associa- 
tions, or  insurance  companies,  subject  to  the  tax  imposed 
by  section  II  of  such  Act  of  October  third,  nineteen 
hundred  and  thirteen,  shall  be  deducted;  and  (c)  for  the 
taxable  year  upon  the  same  basis  and  in  the  same  manner 
as  provided  in  title  I  of  the  Act  entitled  "An  Act  to  In- 
crease the  Revenue,  and  for  Other  Purposes,  *'  approved 
September  eighth,  nineteen  hundred  and  sixteen,  as 
amended  by  this  Act,  except  that  the  amounts  received 
by  it  as  dividends  upon  the  stock  or  from  the  net  earnings 
01  other  corporations,  joint-stock  companies  or  associa- 
tions, or  insurance  companies,  subject  to  the  tax  imposed 
by  title  I  of  such  Act  of  September  eighth,  nineteen 
hundred  and  sixteen,  shall  be  deducted. 

The  net  income  of  a  partnership  or  individual  shall  be 
ascertained  and  returned  for  the  calendar  years  nineteen 
hundred  and  eleven,  nineteen  hundred  and  twelve,  and 
nineteen  hundred  and  thirteen,  and  for  the  taxable  year, 
upon  the  same  basis  and  in  the  same  manner  as  provided 
in  title  I  of  such  Act  of  September  eighth,  nineteen 
hundred  and  sixteen,  as  amended  by  this  Act,  except 
that  the  credit  allowed  by  subdivision  (b)  of  section  five 
of  such  Act  shall  be  deducted.  There  shall  be  allowed 
(a)  in  the  case  of  a  domestic  partnership  the  same  de- 
ductions as  allowed  to  individuals  in  subdivision  (a)  of 
section  five  of  such  Act  of  September  eighth,  nineteen 
hundred  and  sixteen,  as  amended  by  this  Act;  and  (b)  in 
the  case  of  a  foreign  partnership  the  same  deductions  as 
allowed  to  individuals  in  subdivision  (a)  of  section  six 
of  such  Act  as  amended  by  this  Act. 

Sec.  207.  That  as  used  in  this  title  the  term  "Invested 
Capital  '*  for  any  year  means  the  average  invested  capital 
for  the  year,  as  defined  and  limited  in  this  title,  averaged 
monthly. 

As  used  in  this  title  "Invested  Capital*'  does  not  in- 
clude stocks,  bonds  (other  than  obligations  of  the  United 
States),  or  other  assets,  the  income  from  which  is  not 
subject  to  the  tax  imposed  by  this  title,  nor  money  or 

[73] 


Partnerships 

and 

Individuals 


Invested 
Capital 
Monthly 
Average 

Capital 
Excluded 


Domestic 
Corporations 
and  Partner- 
ships 


'Citizens  or 
Residents  of 
the  United 
;State8 


other  property   borrowed,   and   means,   subject   to   the 
above  limitations: 

(a)  In  the  case  of  a  corporation  or  partnership:  (1) 
actual  cash  paid  in,  (2)  the  actual  cash  value  of  tangible 
property  paid  in  other  than  csish,  for  stock  or  shares  in 
such  corporation  or  partnership,  at  the  time  of  such  pay- 
ment (but  in  case  such  tangible  property  was  paid  in 
prior  to  January  first,  nineteen  hundred  and  fourteen, 
the  actual  cash  value  of  such  property  as  of  January  first, 
nineteen  hundred  and  fourteen,  but  in  no  case  to  exceed 
the  par  value  of  the  original  stock  or  shares  specifically 
issued  therefor),  and  (3)  paid  in  or  earned  surplus  and  un- 
divided profits  used  or  employed  in  the  business,  exclusive 
of  undivided  profits  earned  during  the  taxable  year:  pro- 
vided, that  (a)  the  actual  cash  value  of  patents  and  copy- 
rights paid  in  for  stock  or  shares  in  such  corporation  or 
partnership,  at  the  time  of  such  payment,  shall  be  included 
as  invested  capital,  but  not  to  exceed  the  par  value  of 
such  stock  or  shares  at  the  time  of  such  payment,  and  (b) 
the  good  will,  trade-marks,  trade  brands,  the  franchise  of  a 
corporation  or  partnership,  or  other  intangible  property, 
shall  be  included  as  invested  capital  if  the  corporation  or 
partnership  made  payment  bona  fide  therefor  specifically 
as  such  in  cash  or  tangible  property,  the  value  of  such  good 
will,  trade-mark,  trade  brand,  franchise,  or  intangible 
property,  not  to  exceed  the  actual  cash  or  actual  cash 
value  of  the  tangible  property  paid  therefor  at  the  time 
of  such  payment;  but  good  will,  trade-marks,  trade  brands, 
franchise  of  a  corporation  or  partnership,  or  other  intangible 
property,  bona  fide  purchased,  prior  to  March  third, 
nineteen  hundred  and  seventeen,  for  and  with  interests  or 
shares  in  a  partnership  or  for  and  with  shares  in  the  capital 
stock  of  a  corporation  (issued  prior  to  March  third,  nine- 
teen hundred  and  seventeen),  in  an  amount  not  to  exceed, 
on  March  third,  nineteen  hundred  and  seventeen,  twenty 
per  centum  of  the  total  interests  or  shares  in  the  partner- 
ship or  of  the  total  shares  of  the  capital  stock  of  the  cor- 
poration, shall  be  included  in  invested  capital  at  a  value 
not  to  exceed  the  actual  cash  value  at  the  time  of  such 
purchase,  and  in  case  of  issue  of  stock  therefor  not  to 
exceed  the  par  value  of  such  stock. 

(b)  In  the  case  of  an  individual  (1)  actual  cash  paid 
into  the  trade  or  business,  and  (2)  the  actual  cash  value  of 
tangible  property  paid  into  the  trade  or  business,  other 
than  cash,  at  the  tune  of  such  payment  (but  in  case  such 

[74] 


tangible  property  was  paid  in  prior  to  January  first, 
nineteen  hundred  and  fourteen,  the  actual  cash  value  of 
such  property  as  of  January  first,  nineteen  hundred  and 
fourteen),  and  (3)  the  actual  cash  value  of  patents,  copy- 
rights, good  will,  trade-marks,  trade  brands,  franchises, 
or  other  intangible  property,  paid  into  the  trade  or  busi- 
ness, at  the  time  of  such  payment,  if  payment  was  made 
therefor  specifically  as  such  in  cash  or  tangible  property, 
not  to  exceed  the  actual  cash  or  actual  cash  value  of  the 
tangible  property  bona  fide  paid  therefor  at  the  time  of 
such  payment. 

In  the  case  of  a  foreign  corporation  or  partnership  or  Foreign 
of   a   nonresident   alien   individual  the  term    **  Invested   Concerns 
Capital"  means  that  proportion  of  the  entire  invested   and  Non- 
capital, as  defined  and  limited  in  this  title,  which  the  net  Resident 
income  from  sources  within  the  United  States  bears  to  Aliens 
the  entire  net  income. 

Sec.  208.  That  in  case  of  the  reorganization,  consoli- 
dation, or  change  of  ownership  of  a  trade  or  business 
afte\r  March  third,  nineteen  hundred  and  seventeen,  if 
an  interest  or  control  in  such  trade  or  business  of  fifty 
per  centum  or  more  remains  in  control  of  the  same  per- 
sons, corporations,  associations,  partnerships,  or  any  of 
them,  then  in  ascertaining  the  invested  capital  of  the  trade 
or  business  no  asset  transferred  or  received  from  the 
prior  trade  or  business  shall  be  allowed  a  greater  value 
than  would  have  been  allowed  under  this  title  in  comput- 
ing the  invested  capital  of  such  prior  trade  or  business  if 
such  asset  had  not  been  so  transferred  or  received,  unless 
such  asset  was  paid  for  specifically  as  such,  in  cash  or 
tangible  property,  and  then  not  to  exceed  the  actual  cash 
or  actual  cash  value  of  the  tangible  property  paid  therefor 
at  the  time  of  such  payment. 

Sec.  209.     That  in  the  case  of  a  trade  or  business  having  Xax  on 
no  invested  capital  or  not  more  than  a  nominal  capital   Business 
there  shall  be  levied,  assessed,   collected,  and  paid,   in  Having  no 
addition  to  the  taxes  under  existing  law  and  under  this  Capital  or 
Act,  in  lieu  of  the  tax  imposed  by  section  two  hundred  and   Nominal 
one,  a  tax  equivalent  to  eight  per  centum  of  the  net  income  Capital 
of  such  trade  or  business,  in  excess  of  the  following  de- 
ductions:   In  the  case  of  a  domestic  corporation,  $3,000, 
and  in  the  case  of  a  domestic  partnership,  or  a  citizen  or 
resident  of  the  United  States,  $6,000,  in  the  case  of  all 
other  trades  or  business,  no  deduction. 

176  J 


Sec.  210.  That  if  the  Secretary  of  the  Treasury  is 
unable  in  any  case  satisfactorily  to  determine  the  invested 
capital,  the  amount  of  the  deduction  shall  be  the  sum  of 
(1)  an  amount  equal  to  the  same  proportion  of  the  net 
income  of  the  trade  or  business  received  during  the  taxable 
year  as  the  proportion  which  the  average  deduction  (de- 
termined in  the  same  manner  as  provided  in  section  two 
hundred  and  three,  without  including  the  $3,000  or  $6,000 
therein  referred  to)  for  the  same  calendar  year  of  repre- 
sentative cor])orations,  partnerships,  and.  individuals, 
engaged  in  a  like  or  similar  trade  or  business,  bears  to  the 
total  net  income  of  the  trade  or  business  received  by  such 
corporations,  partnerships,  and  individuals,  plus  (2)  in 
the  case  of  a  domestic  corporation  $3,000,  and  in  the  case 
of  a  domestic  partnership  or  a  citizen  or  resident  of  the 
United  States,  $6,000. 

For  the  purpose  of  this  section  the  proportion  between 
the  deduction  and  the  net  income  in  each  trade  or  business 
shall  be  determined  by  the  Commissioner  of  Internal 
Revenue  in  accordance  with  regulations  prescribed  by 
him,  with  the  approval  of  the  Secretary  of  the  Treasury. 
In  the  case  of  a  corporation  or  partnership  which  has 
fixed  its  own  fiscal  year,  the  proportion  determined  for 
the  calendar  year  ending  during  such  fiscal  year  shall  be 
used. 

Sec.  211.  That  every  foreign  partnership  having  a 
net  income  of  $3,000  or  more  for  the  taxable  year,  and 
every  domestic  partnership  having  a  net  income  of  $6,000 
or  more  for  the  taxable  year,  shall  render  a  correct  re- 
turn of  the  income  of  the  trade  or  business  for  the  taxable 
year,  setting  forth  specifically  the  gross  income  for  such 
year,  and  the  deductions  allowed  in  this  title.  Such  re- 
turns shall  be  rendered  at  the  same  time  and  in  the  same 
manner  as  is  prescribed  for  income-tax  returns  under 
title  I  of  such  Act  of  September  eighth,  nine^teen  hundred 
and  sixteen,  as  amended  by  this  Act. 

Sec.  212.  That  all  administrative,  special  and  general 
provisions  of  law,  including  the  laws  in  relation  to  the 
assejssment,  remission,  collection,  and  refund  of  internal- 
revenue  taxes  not  heretofore  specifically  repealed,  and  not 
inconsistent  with  the  provisions  of  this  title^  are  hereby 
extended  and  made  applicable  to  all  the  provisions  of  this 
title  and  to  the  tax  herein  imposed,  and  all  provisions 
of  title  I  of  such  Act  of  September  eighth,   nineteen 

[76] 


hundred  and  sixteen,  as  amended  by  this  Act,  relating 
to  returns  and  payment  of  the  tax  therein  imposed, 
including  penalties,  are  hereby  made  applicable  to  the  tax 
imposed  by  this  title. 

Sec.  213.  That  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  shall 
make  all  necessary  regulations  for  carrying  out  the  pro- 
visions of  this  title,  and  may  require  any  corporation, 
partnership,  or  individual,  subject  to  the  provisions  of 
this  title,  to  furnish  him  with  such  facts,  data,  and  in- 
formation as  in  his  judgment  are  necessary  to  collect  the 
tax  imposed  by  this  title. 

Sec.  214.  That  title  II  (sections  two  hundred  to  two 
hundred  and  seven,  inclusive)  of  the  Act  entitled  "An  Act 
to  provide  increased  revenue  to  defray  the  expenses  of 
the  increased  appropriations  for  the  army  and  navy, 
and  the  extensions  of  fortifications,  and  for  other  pur- 
poses," approved  March  third,  nineteen  hundred  and 
seventeen,  is  hereby  repealed. 

Any  amount  heretofore  or  hereafter  paid  on  account 
of  the  tax  imposed  by  such  title  II,  shall  be  credited 
toward  the  payment  of  the  tax  imposed  by  this  title,  and 
if  the  amount  so  paid  exceeds  the  amount  of  such  tax  the 
excess  shall  be  refunded  as  a  tax  erroneously  or  illegally 
collected. 

Subdivision  (1)  of  section  three  hundred  and  one  of 
such  Act  of  September  eighth,  nineteen  hundred  and  six- 
teen, is  hereby  amended  so  that  the  rate  of  tax  for  the  tax- 
able year  nineteen  hundred  and  seventeen  shall  be  ten  per 
centum  instead  of  twelve  and  one-half  per  centum,  as 
therein  provided. 

Subdivision  (2)  of  such  section  is  hereby  amended  to 
read  as  follows: 

"  (2)  This  section  shall  cease  to  be  of  effect  on  and  after 
January  first,  nineteen  hundred  and  eighteen.  '^ 


Former 
Excess 
Profits  Tax 
Repealed 


Munitions 
Tax 


Title  III — War  Tax  on  Beverages 

Sec.  300.     That  on  and  after  the  passage  of  this  Act   Distilled 
there  shall  be  levied  and  collected  on  all  distilled  spirits  in   Spirits 
bond  at  that  time  or  that  have  been  or  that  may  be  then  or 
thereafter  produced  in  or  imported  into  the  United  States, 

[771 


except  such  distilled  spirits  as  are  subject  to  the  tax  pro- 
vided in  section  three  hundred  and  three,  in  addition 
to  the  tax  now  imposed  by  law,  a  tax  of  $1 .10  (or,  if 
withdrawn  for  beverage  purposes,  or  for  use  in  the  manu- 
facture or  production  of  any  article  used  or  intended  for 
use  as  a  beverage,  a  tax  ot  $2.10)  on  each  proof  gallon, 
or  wine  gallon  when  below  proof,  and  a  proportionate 
tax  at  a  like  rate  on  all  fractional  parts  of  such  proof 
or  wine  gallon,  to  be  paid  by  the  distiller  or  importer 
when  withdrawn,  and  collected  under  the  provisions  of 
existing  law. 

That  in  addition  to  the  tax  under  existing  law  there 
shall  be  levied  and  collected  upon  all  perfumes  hereafter 
imported  into  the  United  States  containmg  distilled  spirits, 
a  tax  of  $1.10  per  wine  gallon,  and  a  proportionate  tax  at 
a  like  rate  on  all  fractional  parts  of  such  wine  gallon. 
Such  tax  shall  be  collected  by  the  collector  of  customs  and 
deposited  as  internal-revenue  collections,  under  such  rules 
and  regulations  as  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  may 
prescribe. 

Sec.  301.  That  no  distilled  spirits  produced  after  the 
passage  of  this  Act  shall  be  imported  into  the  United 
States  from  any  foreign  country,  or  from  the  West  Indian 
Islands  recently  acquired  from  Denmark  (unless  produced 
from  products  the  growth  of  such  islands,  and  not  then  into 
any  State  or  Territory  or  District  of  the  United  States  in 
which  the  manufacture  or  sale  of  intoxicating  liquor  is 
prohibited),  or  from  Porto  Rico,  or  the  Philippine  Islands. 
Under  such  rules,  regulations,  and  bonds  as  the  Secretary 
of  the  Treasury  may  prescribe,  the  provisions  of  this 
section  shall  not  apply  to  distilled  spirits  imported  for 
other  than  (1)  beverage  purposes  or  (2)  use  in  the  manu- 
facture or  production  of  any  article  used  or  intended  for 
use  as  a  beverage. 

Sec.  302.  That  at  registered  distilleries  producing  alco- 
hol, or  other  high-proof  spirits,  packages  may  be  filled  with 
such  spirits  reduced  to  not  less  than  one  hundred  proof  from 
the  receiving  cisterns  and  tax  paid  without  being  entered 
into  bonded  warehouse.  Such  spirits  may  also  be  transferred 
from  the  receiving  cisterns  at  such  distilleries,  by  means  of 
pipe  lines,  direct  to  storage  tanks  in  the  bonded  warehouse 
and  may  be  warehoused  in  such  storage  tanks.  Such  spirits 
may  be  also  transferred  in  tanks  or  tank  cars  to  general 

[78] 


bonded  warehouses  for  storage  therein,  either  in  storage 
tanks  in  such  warehouses  or  in  the  tanks  in  which  thev  were 
transferred.  Such  spirits  may  also  be  transferred  after 
tax  payment  from  receiving  cisterns  or  warehouse  storage 
tanks  to  tanks  or  tank  cars  and  may  be  transported  in  such 
tanks  or  tank  cars  to  the  premises  of  rectifiers  of  spirits. 
The  Commissioner  of  Internal  E,evenue,  with  the  approval 
of  the  Secretary  of  the  Treasury,  is  hereby  empowered  to 
prescribe  all  necessary  regulations  relating  to  the  drawing 
off,  transferring,  gauging,  storing  and  transporting  of  such 
spirits;  the  records  to  be  kept  and  returns  to  be  made;  the 
size  and  kind  of  packages  and  tanks  to  be  used;  the  marking, 
branding,  numbering  and  stamping  of  such  packages  and 
tanks;  the  kinds  of  stamps,  if  any,  to  be  used;  and  the  time 
and  manner  of  paying  the  tax;  the  kind  of  bond  and  the 
penal  sum  of  same.  The  tax  prescribed  by  law  must  be 
paid  before  such  spirits  are  removed  from  the  distillery 
premises,  or  from  general  bonded  warehouse  in  the  case 
of  spirits  transferred  thereto,  except  as  otherwise  provided 
by  law. 

Under  such  regulations  as  the  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the  Treas- 
ury, may  prescribe,  distilled  spirits  may  hereafter  be  drawn 
from  receiving  cisterns  and  deposited  in  distillery  ware- 
houses without  having  affixed  to  the  packages  contain- 
ing the  same  distillery  warehouse  stamps,  and  such  pack- 
ages, when  so  deposited  in  warehouse,  may  be  withdrawn 
therefrom  on  the  original  gauge  where  the  same  have  re- 
mained in  such  warehouse  for  a  period  not  exceeding  thirty 
days  from  the  date  of  deposit. 

Under  such  regulations  as  the  Commissioner  of 
Internal  Revenue,  with  the  approval  of  the  Secretary'  of 
the  Treasury,  may  prescribe,  the  manufacture,  ware- 
housing, withdrawal,  and  shipment,  under  the  provisions 
of  existing  law,  of  ethyl  alcohol  for  other  than  (1)  beverage 
purposes  or  (2)  use  in  the  manufacture  or  production  of 
any  article  used  or  intended  for  use  as  a  beverage,  and  de- 
natured alcohol,  may  be  exempted  from  the  provisions  of 
section  thirty-two  hundred  and  eighty-three,  Revised 
Statutes  of  the  United  States. 

Under  such  regulations  as  the  Commissioner  of 
Internal  Revenue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  may  prescribe,  manufacturers  of  ethyl  alco- 
hol for  other  than  beverage  purposes  may  be  granted  per- 

[79] 


mission  under  the  provisions  of  section  thirty-two  hundred 
and  eighty-five,  Revised  Statutes  of  the  United  States, 
to  fill  fermentinp;  tubs  in  a  sweet-mash  distillery  not  oftener 
than  once  in  forty -eight  hours. 

Sec.  303.  That  upon  all  distilled  spirits  produced  in 
or  imported  into  the  United  States  upon  which  the  tax  now 
imposed  by  law  has  been  paid,  and  which,  on  the  day  this 
Act  is  passed,  are  held  by  a  retailer  in  a  quantity  in 
excess  of  fifty  gallons  in  the  aggregate,  or  by  any  other  per- 
son, corporation,  partnership,  or  association  in  any  quan- 
tity, and  which  are  intended  for  sale,  there  shall  be  levied, 
assessed,  collected  and  paid  a  tax  of  $1.10  (or,  if  intended 
for  sale  for  beverage  purposes,  or  for  use  in  the  manufac- 
ture or  production  of  any  article  used  or  intended  for  use 
as  a  beverage,  a  tax  of  $2.10)  on  each  proof  gallon, 
and  a  proportionate  tax  at  a  like  rate  on  all  fractional 
parts  of  such  proof  gjallon:  Provided j  That  the  tax 
on  such  distilled  spirits  in  the  custody  of  a  court  of  bank- 
ruptcy in  insolvency  proceedings  on  June  first,  nineteen 
hundred  and  seventeen,  shall  be  paid  by  the  person  to 
whom  the  court  delivers  such  distilled  spirits  at  the  time 
of  such  delivery,  to  the  extent  that  the  amount  thus 
delivered  exceeds  the  fifty  gallons  hereinbefore  provided. 

Sec.  304.  That  in  addition  to  the  tax  now  imposed 
or  imposed  by  this  Act  on  distilled  spirits  there  shall  be 
levied,  assessed,  collected,  and  paid  a  tax  of  15  cents  on 
each  proof  gallon  and  a  proportionate  tax  at  a  like  rate  on 
all  fractional  parts  of  such  proof  gallon  on  all  distilled 
spirits  or  wines  hereafter  rectified,  purified,  or  refined  in 
such  manner,  and  on  all  mixtures  hereafter  produced  in 
such  manner,  that  the  peraon  so  rectifying^  purifying,  re- 
fining, or  mixing  the  same  is  a  rectifier  within  the  meaning 
of  section  thirty-two  hundred  and  forty-four.  Revised 
Statutes,  as  amended,  and  on  all  such  articles  in  the  pos- 
session of  the  rectifier  on  the  day  this  Act  is  passed: 
Provided,  That  this  tax  shall  not  apply  to  gin  produced  by 
the  redistillation  of  a  pure  spirit  over  juniper  berries  and 
other  aromatics. 

When  the  process  of  rectification  is  completed  and  the 
tax  prescribed  by  this  section  has  been  paid,  it  shall  be 
unlawful  for  the  rectifier  or  other  dealer  to  reduce  in  proof 
or  increase  in  volume  such  spirits  or  wine  by  the  addition 
of  water  or  other  substance;  nothing  herein  contained 

rso] 


shall,  however,  prevent  a  rectifier  from  using  again  in  the 
process  of  rectincation  spirits  already  rectified  and  upon 
which  the  tax  has  theretofore  been  paid. 

The  tax  imposed  by  this  section  shall  not  attach  to 
cordials  or  liqueura  on  which  a  tax  is  imposed  and  paid 
under  the  Act  entitled  "An  Act  to  increase  the  revenue, 
and  for  other  purposes,"  approved  September  eighth, 
nineteen  hundred  and  sixteen,  nor  to  the  mixing  and 
blending  of  wines,  where  such  blending  is  for  the  sole  pur- 
pose of  perfecting  such  wines  according  to  commercial 
standards,  nor  to  blends  made  exclusively  of  two  or  more 
pure  straight  whiskies  aged  in  wood  for  a  period  not  less 
than  four  years  and  without  the  addition  of  coloring  or 
flavoring  matter  or  any  other  substance  than  pure  water 
and  if  not  reduced  below  ninety  proof:  Provided,  That 
such  blended  whiskies  shall  be  exempt  from  tax  under  this 
section  only  when  compounded  under  the  immediate 
supervision  of  a  revenue  officer,  in  such  tanks  and  under 
such  conditions  and  supervision  as  the  Commissioner  of 
Internal  Revenue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  may  prescribe. 

All  distilled  spirits  taxable  under  this  section  shall  be 
subject  to  uniform  regulations  concerning  the  use  thereof 
in  the  manufacture,  blending,  compounding,  mixing, 
marking,  branding,  and  sale  of  whisky  and  rectified  spirits, 
and  no  discrimination  whatsoever  shall  be  made  by  reason 
of  a  difference  in  the  character  of  the  material  from  which 
same  may  have  been  produced. 

The  business  of  a  rectifier  of  spirits  shall  be  carried  on, 
and  the  tax  on  rectified  spirits  shall  be  paid,  under  such 
rules,  regulations,  and  bonds  as  may  be  prescribed  by  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of 
the  Secretary  of  the  Treasury. 

Any  person  violating  any  of  the  provisions  of  this  sec- 
tion shall  be  deemed  to  be  guilty  of  a  misdemeanor  and, 
upon  conviction,  shall  be  fined  not  more  than  $1,000  or 
imprisoned  not  more  than  two  years.  He  shall,  in  addi- 
tion, be  liable  to  double  the  tax  evaded,  together  with  the 
tax,  to  be  collected  by  assessment  or  on  any  bond  given. 

Sec.  305.  That  hereafter  collectors  of  internal  revenue 
shall  not  furnish  wholesale  liquor  dealer^s  stamps  in  lieu  of 
and  in  exchange  for  stamps  for  rectified  spirits  unless  the 
package  covered  by  stamp  for  rectified  spirits  is  to  be  broken 
into  smaller  packages. 

[81] 


The  Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury,  is  authorized  to 
discontinue  the  use  of  the  following  stamps  whenever  in  his 
judgment  the  interests  of  the  Government  will  be  sub- 
served thereby: 

Distillery  warehouse,  special  bonded  warehouse,  special 
bonded  rewarehouse,  general  bonded  warehouse,  general 
bonded  retransfer,  transfer  brandy,  export  tobacco,  export 
cigars,  export  oleomargarine  and  export  fermented  liquor 
stamps. 

Sec.  306.  That  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  is 
hereby  authorized  to  require  at  distilleries,  breweries, 
rectifying  houses,  and  wherever  else  in  his  judgment  such 
action  may  be  deemed  advisable,  the  installation  of  meters, 
tanks,  pipes,  or  any  other  apparatus  for  the  purpose  of 
protecting  the  revenue,  and  such  meters,  tanks,  and  pipes 
and  all  necessary  labor  incident  thereto  shall  be  at  the 
expense  of  the  person,  corporation,  partnership,  or  asso- 
ciation on  whose  premises  the  installation  is  required. 
Any  such  person,  corporation,  partnership,  or  association 
refusing  or  neglecting  to  install  such  apparatus  when  so 
required  by  the  commissioner  shall  not  be  permitted  to 
conduct  business  on  such  premises. 

Sec.  307.  That  on  and  after  the  passage  of  this  Act 
there  shall  be  levied  and  collected  on  all  beer,  lager  beer, 
ale,  porter,  and  other  similar  fermented  liquor,  containing 
one-half  per  centum  or  more  of  alcohol,  brewed  or  manu- 
factured and  sold,  or  stored  in  warehouse,  or  removed  for 
consumption  or  sale,  within  the  United  States,  by  what- 
ever name  such  liquors  may  be  called,  in  addition  to  the 
tax  now  imposed  by  law,  a  tax  of  $1.50  for  every  barrel 
containing  not  more  than  thirty-one  gallons,  and  at  a 
like  rate  for  any  other  quantity  or  for  the  fractional  parts 
of  a  barrel  authorized  and  defined  by  law. 

Sec.  308.  That  from  and  after  the  passage  of  this 
Act  taxable  fermented  liquors  may  be  conveyed  without 
payment  of  tax  from  the  brewery  premises  where  produced 
to  a  contiguous  industrial  distillery  of  either  class  estab- 
lished under  the  Act  of  October  third,  nineteen  hundred 
and  thirteen,  to  be  used  as  distilling  material,  and  the 
residue  from  such  distillation,  containing  less  than  one- 
half  of  one  per  centum  of  alcohol  by  volume,  which  is 
to  be  used  in  making  beverages,  may  be  manipulated  by 

[82] 


cooling,  flavoring,  carbonating,  settling,  and  filtering  on 
the  distillery  premises  or  elsewhere. 

The  removal  of  the  taxable  fermented  liquor  from  the 
brewery  to  the  distillery  and  the  operation  of  the  distillery 
and  removal  of  the  residue  therefrom  shall  be  under  the 
supervision  of  such  officer  or  officers  as  the  Commissioner 
of  Internal  Revenue  shall  deem  proper,  and  the  Commis- 
sioner of  Internal  Revenue,  with  the  approval  of  the  Secre- 
tary of  the  Treasury,  is  hereby  authorized  to  make  such 
regulations  from  time  to  time  as  may  be  necessary  to  give 
force  and  effect  to  this  section  and  to  safeguard  the  revenue. 
^  Sec.  309.  That  upon  all  still  wines,  including  Ver-  Wines  anH 
muth,  and  upon  all  Champagne  and  other  Sparkling  Wines,  Cordials 
Liqueurs,  Cordials,  Artificial  or  Imitation  Wines  or  Com- 
pounds sold  as  Wine,  produced  in  or  imported  into  the 
United  States,  and  hereafter  removed  from  the  custom- 
house, place  of  manufacture,  or  from  bonded  premises 
for  sale  or  consumption,  there  shall  be  levied  and  collected, 
in  addition  to  the  tax  now  imposed  by  law  upon  such  ar- 
ticles, a  tax  equal  to  such  tax,  to  be  levied,  collected,  and 
paid  under  the  provisions  of  existing  law. 

Sec.  310.  That  upon  all  articles  specified  in  section 
three  hundred  and  nine  upon  which  the  tax  now  imposed 
by  law  has  been  paid  and  which  are  on  the  day  this  Act 
is  passed  held  in  excess  of  twenty-five  gallons  in  the  aggre- 
gate of  such  articles  and  intended  for  sale,  there  shall  be 
levied,  collected,  and  paid  a  tax  equal  to  the  tax  imposed 
by  such  section. 

Sec.  311.  That  upon  all  grape  brandy  or  wine  spirits  Grape 
withdrawn  by  a  producer  of  wines  from  any  fruit  dis-  Brandy 
tillery  or  special  bonded  warehouse  under  subdivision  (c) 
of  section  four  hundred  and  two  of  the  Act  entitled  "An 
Act  to  increase  the  revenue,  and  for  other  purposes," 
approved  September  eighth,  nineteen  hundred  and  sixteen, 
there  shall  be  levied,  assessed,  collected,  and  paid  in  addi- 
tion to  the  tax  therein  imposed,  a  tax  equal  to  double 
such  tax,  to  be  assessed,  collected,  and  paid  under  the 
provisions  of  existing  law. 

Sec.  312.  That  upon  all  sweet  wines  held  for  sale  by  Sweet  Wines 
the  producer  thereof  upon  the  day  this  Act  is  passed 
there  shall  be  levied,  assessed,  collected,  and  paid  an  addi- 
tional tax  equivalent  to  10  cents  per  proof  gallon  upon  the 
grape  brandy  or  wine  spirits  used  in  the  fortification  of 
such  wine,  and  an  additional  tax  of  20  cents  per  proof  gallon 

[83] 


shall  be  levied,  assessed,  collected,  and  paid  upon  all  grape 
brandy  or  wine  spirits  withdrawn  by  a  producer  of  sweet 
wines  for  the  purpose  of  fortifying  such  wines  and  not  so 
used  prior  to  the  passage  of  this  Act. 

Sec.  313.    That  there  shall  be  levied,  assessed,  col- 
lee  ted,  and  paid — 
Sirups  and  (a)  Upon  all  prepared  sirups  or  extracts  (intended  for 

Extracts  use  in  the  manufacture  or  production  of  beverages,  com- 

monly known  as  soft  drinks,  by  soda  fountains,  bottling 
establishments,  and  other  similar  places)  sold  by  the  man- 
ufacturer, producer,  or  importer  thereof,  if  so  sold  for  not 
more  than  $1.30  per  gallon,  a  tax  of  5  cents  per  gallon ;  if  so 
sold  for  more  than  $1.30  and  not  more  than  $2  per  gallon,  a 
tax  ot  8  cents  per  gallon ;  if  so  sold  for  more  than  $2  and  not 
more  than  $3  per  gallon,  a  tax  of  10  cents  per  gallon;  if  so 
sold  for  more  than  $3  and  not  more  than  $4  per  gallon,  a 
tax  of  15  cents  per  gallon;  and  if  so  sold  for  more  than  $4  per 
gallon,  a  tax  of  20  cents  per  gallon;  and 
Soft  Drinks  (b)  Upon  all  unfermented  grape  juice,  soft  drinks  or 

artificial  mineral  waters  (not  carbonated),  and  fermented 
liquors  containing  less  than  one-half  per  centum  of  alcohol, 
sold  by  the  manufacturer,  producer,  or  importer  thereof, 
in  bottles  or  other  closed  containers,  and  upon  all  ginger 
ale,  root  beer,  sarsaparilla,  pop,  and  other  carbonated 
waters  or  beverages,  manufactured  and  sold  by  the  manu- 
facturer, producer,  or  importer  of  the  carbonic  acid  gas  used 
in  carbonating  the  same,  a  tax  of  1  cent  per  gallon;  and 
Mineral  (c)  Upon  all  natural  mineral  waters  or  table  waters, 

Waters  sold  by  the  producer,  bottler,  or  importer  thereof,  in  bottles 

or  other  closed  containers,  at  over  10  cents  per  gallon,  a  tax 
of  1  cent  per  gallon. 
Monthly  Sec.  314.     That   each   such    manufacturer,    producer, 

Returns  bottler,  or  importer  shall  make  monthly  returns  under 

oath  to  the  collector  of  internal  revenue  for  the  district  in 
which  is  located  the  principal  place  of  business,  containing 
such  information  necessary  for  the  assessment  of  the  tax, 
and  at  such  times  and  in  such  manner,  as  the  Commissioner 
of  Internal  Revenue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  may  by  regulation  prescribe. 
Carbonic  Sec.  315.     That  upon  all  carbonic  acid  gas  in  drums  or 

Acid  Gas  other  containers  (intended  for  use  in  the  manufacture  or 

production  of  carbonated  water  or  other  drinks)  sold  by  the 
manufacturer,  producer,  or  importer  thereof,  there  shall  be 
levied,  assessed,  collected,  and  paid  a  tax  of  5  cents  per 

[84] 


pound.  Such  tax  shall  be  paid  by  the  purchaser  to  the 
vendor  thereof  and  shall  be  collected,  returned,  and  paid 
to  the  United  States  by  such  vendor  in  the  same  manner 
as  provided  in  section  five  hundred  and  three. 

Title  IV — War  Tax  on  Cigars,  Tobacco, 
and  Manufactures  Thereof 

Sec.  400.  That  upon  cigars  and  cigarettes,  which  shall  Cigars 
be  manufactured  and  sold,  or  removed  for  consumption  or 
sale,  there  shall  be  levied  and  collected,  in  addition  to  the 
taxes  now  imposed  by  existing  law,  the  following  taxes,  to 
be  paid  by  the  manufacturer  or  importer  thereof:  fa)  on 
cigars  of  all  descriptions  made  of  tobacco,  or  any  substitute 
therefor,  and  weighing  not  more  than  three  pounds  per 
thousand,  25  cents  per  thousand;  (b)  on  cigars  made  of 
tobacco,  or  any  substitute  therefor,  and  weighing  more  than 
three  pounds  per  thousand,  if  manufactured  or  imported  to 
retail  at  4  cents  or  more  each,  and  not  more  than  7  cents 
each,  $1  per  thousand;  (c)  if  manufactured  or  imported 
to  retail  at  more  than  7  cents  each  and  not  more  than  15 
cents  each,  $3  per  thousand;  (d)  if  manufactured  or  im- 
ported to  retail  at  more  than  15  cents  each  and  not  more 
than  20  cents  each,  $5  per  thousand;  (e)  if  manufactured 
or  imported  to  retail  at  more  than  20  cents  each,  $7  per 
thousand:  Proj/ided,  That  the  word  ''retail"  as  used  in 
this  section  shall  mean  the  ordinary  retail  price  of  a  single 
cigar,  and  that  the  Commissioner  of  Internal  Revenue 
may,  by  regulation,  require  the  manufacturer  or  importer 
to  affix  to  each  box  or  container  a  conspicuous  label  indi- 
cating by  letter  the  clause  of  this  section  under  which  the 
cigars  therein  contained  have  been  tax-paid,  which  must 
correspond  with  the  tax-paid  stamp  on  said  box  or  con- 
tainer; (f)  on  cigarettes  made  of  tobacco,  or  any  substitute  Cigarettes 
therefor,  made  in  or  imported  into  the  Umted  States, 
and  weighing  not  more  than  three  pounds  per  thousand, 
80  cents  per  thousand;  weighing  more  than  three  pounds 
per  thousand,  $1 .20  per  thousand. 

Every  manufacturer  of  cigarettes  (including  small  cigars   Packages 
weighing  not  more  than  three  pounds  per  thousand)  shall   for 
put  up  all  the  cigarettes  and  such  small  cigars  that  he  Cigarettes 
manufactures  or  has  manufactured  for  him,  and  sells  or 
removes  for  consumption  or  use,  in  packages  or  parcels 
containing  five,  eight,  ten,  twelve,  fifteen,  sixteen,  twenty, 

[85] 


Tobacco  and 
Snuff 


Packages  for 
Tobacco  and 
Snnfif 


Effective 
Date  of  Tax 


twenty-four,  forty,  fiftv,  eighty,  or  one  hundred  cigarettes 
each,  and  shall  securely  affix  to  each  of  said  packages  or 
parcels  a  suitable  stamp  denoting  the  tax  thereon  and  shall 
properly  cancel  the  same  prior  to  such  sale  or  removal  for 
consumption  or  use  under  such  regulations  as  the  Com- 
missioner of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  shall  prescribe;  and  all  cigar- 
ettes imported  from  a  foreign  country  shall  be  packed, 
stamped,  and  the  stamps  canceled  in  a  like  manner,  in 
addition  to  the  import  stamp  indicating  inspection  of  the 
custom-house  before  they  are  withdrawn  therefrom. 

Sec.  401.  That  upon  all  tobacco  and  snuff  hereafter 
manufactured  and  sold,  or  removed  for  consumption  or 
use,  there  shall  be  levied  and  collected,  in  addition  to  the 
tax  now  imposed  by  law  upon  such  articles,  a  tax  of  5  cents 
per  pound,  to  be  levied,  collected,  and  paid  under  the  pro- 
visions of  existing  law. 

In  addition  to  the  packages  provided  for  under  existing 
law,  manufactured  tobacco  and  snuff  may  be  put  up  and 
prepared  by  the  manufacturer  for  sale  or  consumption,  in 
packages  of  the  following  description:  Packages  con- 
taining one-eighth,  three-eighths,  five-eighths,  seven-eighths, 
one  and  one-eighth,  one  and  three-eighths,  one  and  five- 
eighths,  one  and  seven-eighths,  and  five  ounces. 

Sec.  402.  That  sections  four  hundred,  four  hundred 
and  one,  and  four  hundred  and  four,  shall  take  effect 
thirty  days  after  the  passage  of  this  Act:  Provided,  That 
after  the  passage  of  this  Act  and  before  the  expiration 
of  the  aforesaid  thirty  days,  cigarettes  and  manufactured 
tobacco  and  snuff  may  be  put  up  in  the  packages  now 
provided  for  by  law  or  in  the  packages  provided  for  in 
sections  four  hundred  and  four  hundred  and  one. 

Sec.  403.  That  there  shall  also  be  levied  and  collected, 
upon  all  manufactured  tobacco  and  snuff  in  excess  of  one 
hundred  pounds,  or  upon  cigars  or  cigarettes  in  excess  of 
one  thousand,  which  were  manufactured  or  imported,  and 
removed  from  factory  or  custom-house  prior  to  the 
passage  of  this  Act,  bearing  tax-paid  stamps  affixed  to 
such  articles  for  the  payment  of  the  taxes  thereon,  and 
which  are,  on  the  day  after  this  Act  is  passed,  held  and 
intended  for  sale  by  any  person,  corporation,  partnership, 
or  association,  and  upon  all  manufactured  tobacco, 
snuff,  cigars,  or  cigarettes,  removed  from  factory  or 
custom-house  after  the  passage  of  this  Act,  but    prior  to 

[86] 


the  time  when  the  tax  imposed  by  section  four  hundred 
or  section  four  hundred  and  one,  upon  such  articles 
takes  effect,  an  additional  tax  equal  to  one-half  the  tax 
imposed  by  such  sections  upon  such  articles. 

Sec.  404.     That  there  shall  be  levied,  assessed,  and   Cigarette 
collected  upon  cigarette  paper  made  up  into  packages,   Papers  and 
books,  sets,  or  tubes,  made  up  in  or  imported  into  the   Tubes 
United  States  and  intended  for  use  by  the  smoker  in 
making  cigarettes  the  following  taxes:    On  each  package, 
book,  or  set,  containing  more  than  twenty-five  but  not 
more  than  fifty  papers,  one-half  of  1  cent;  containing 
more  than  fifty  but  not  more  than  one  hundred  papers,  1 
cent;  containing  more  than  one  hundred  papers,  1  cent 
for  each  one  hundred  papers  or  fractional  part  thereof; 
and  upon  tubes,  2  cents  for  each  one  hundred  tubes  or 
fractional  part  thereof. 


Title  V — War  Tax  on  Facilities  Furnished 
by  Public  Utilities  and  Insurance 

Sec.  500.     That    from    and   after    the    first    day    of  Freight 
November,  nineteen  hundred  and  seventeen,  there  shall  be 
levied,  assessed,  collected,  and  paid  (a)  a  tax  equivalent  to 
three  per  centum  of  the  amount  paid  for  the  transportation 
by  rail  or  water  or  by  any  form  of  mechanical  motor 
power  when  in  competition  with  carriers  by  rail  or  water  Express 
of  property  by  freight  consigned  from  one  point  in  the 
United  States  to  another;  (b)  a  tax  of  1  cent  for  each 
20  cents,  or  fraction  thereof,  paid  to  any  person,  corpora- 
tion, partnership,  or  association,  engaged  in  the  business 
of  transporting  parcels  or  packages  by  ex^jress  over  reg- 
ular routes  between  fixed  terminals,  for  the  transportation 
of  any  package,  parcel,  or  shipment  by  express  from  one 
point  in  the  United  States  to  another:  ProvidedyThat  noth- 
ing herein  contained  shall  be  construed  to  require  the 
carrier  collecting  such  tax  to  list  separately  in  any  bill 
of  lading,  freight  receipt,  or  other  similar  document,  the   Passenger 
amount  of  the  tax  herein  levied,  if  the  total  amount  of  the   Transp^r- 
freight  and  tax  be  therein  stated;  (c)  a  tax  equivalent  to  tation 
eight  per  centum  of  the  amount  paid  for  the  transporta- 
tion of  persons  by  rail  or  water,  or  by  any  form  of  mechani- 
cal motor  power,  on  a  regular  established  line,  when  in 

[87] 


competition  with  carriers  by  rail  or  water,  from  one 
point  in  the  United  States  to  another  or  to  any  point 
m  Canada  or  Mexico,  where  the  ticket  therefor  is  sold 
or  issued  in  the  United  States,  not  including  the  amount 
paid  for  commutation  or  season  tickets  for  trips  less  than 
thirty  miles,  or  for  transportation  the  fare  for  which  does 
not  exceed  35  cents,  and  a  tax  equivalent  to  ten  per  centum 
of  the  amount  paid  for  seats,  berths,  and  staterooms  in  par- 
lor cars,  sleeping  cars,  or  on  vessels.  If  a  mileage  book 
used  for  such  transportation  or  accommodation  has  been 

Eurchased  before  this  section  takes  effect,  or  if  cash  fare 
e  paid,  the  tax  imposed  by  this  section  shall  be  collected 
from  the  person  presenting  the  mileage  book,  or  pay- 
ing the  cash  fare,  by  the  conductor  or  other  agent,  when 
presented  for  such  transportation  or  accommodation,  and 
the  amount  so  collected  shall  be  paid  to  the  United  States 
in  such  manner  and  at  such  times  as  the  Commissioner 
of  Internal  Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury,  may  prescribe;  if  a  ticket  (other  than 
a  mileage  book)  is  bought  and  partially  used  before  this 
section  goes  into  effect  it  shall  not  be  taxed,  but  if  bought 
but  not  su  u  ed  before  this  section  takes  effect,  it  shall  not 
be  valid  for  passage  until  the  tax  has  been  paid  and  such 
payment  evidenced  on  the  ticket  in  such  manner  as  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of 
the  Secretary  of  the  Treasury,  may  by  regulation  pre- 
scribe; (d)  a  tax  equivalent  to  five  per  centum  of  the 
amount  paid  for  the  transportation  of  oil  by  pipe  line; 
(e)  a  tax  of  5  cents  upon  each  telegraph,  telephone, 
or  radio,  dispatch,  message,  or  conversation,  which  orig- 
inates within  the  United  States,  and  for  the  transmission 
of  which  a  charge  of  15  cents  or  more  is  imposed:  Providedy 
That  only  one  pajTnent  of  such  tax  shall  be  required, 
notwithstanding  the  lines  or  stations  of  one  or  more 
persons,  corporations,  partnerships,  or  associations  shall 
be  used  for  the  transmission  of  such  dispatch,  message, 
or  conversation. 

Sec.  501.  That  the  taxes  imposed  by  section  five  hun- 
dred shall  be  paid  by  the  person,  corporation,  partnership, 
or  association  paying  for  the  services  or  facilities  rendered. 

In  case  such  carrier  does  not,  because  of  its  owner- 
ship of  the  commodity  transported,  or  for  any  other  reason, 
receive  the  amount  which  as  a  carrier  it  would  otherwise 
charge,  such  carrier  shall  pay  a  tax  equivalent  to  the  tax 

[88) 


which  would  be  imposed  upon  the  transportation  of  such  Transpop- 
commodity  if  the  carrier  received  payment  for  such  trans-  tation 
portation:  Provided^  That  in  case  of  a  carrier  which  on 
May  first,  nineteen  hundred  and  seventeen,  had  no  rates 
or  tariffs  on  file  with  the  proper  Federal  or  State  authority, 
the  tax  shall  be  computed  on  the  basis  of  the  rates  or  tariffs 
of  other  carriers  for  like  services  as  ascertained  and  deter- 
mined by  the  Commissioner  of  Internal  Revenue:  Provided 
further^  That  nothing  in  this  or  the  preceding  section 
shall  be  construed  as  imposing  a  tax  (a)  upon  the  trans- 
portation of  any  commodity  which  is  necessary  for  the  use 
of  the  carrier  in  the  conduct  of  its  business  as  such  and  is 
intended  to  be  so  used  or  has  been  so  used;  or  (b)  upon 
the  transportation  of  company  material  transported  by 
one  carrier,  which  constitutes  a  part  of  a  railroad  system 
for  another  carrier  which  is  also  a  part  of  the  same  system. 

Sec.  502.  That  no  tax  shall  be  imposed  under  section 
five  hundred  upon  any  payment  received  for  sersdcee 
rendered  to  the  United  States,  or  any  State,  Terri- 
tory, or  the  District  of  Columbia.  The  right  to  exemption 
under  this  section  shall  be  evidenced  in  such  manner  as  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of 
the  Secretary  of  the  Treasury,  may  by  regulation  prescribe. 

Sec.  503.  That  each  person,  corporation,  partnership, 
or  association  receiving  any  payments  referred  to  in  section 
five  hundred  shall  collect  the  amount  of  the  tax,  if  any, 
imposed  by  such  section  from  the  person,  corporation,  part- 
nership, or  association  making  such  payments,  and  shall 
make  monthly  returns  under  oath,  in  duplicate,  and  pay 
the  taxes  so  collected  and  the  taxes  imposed  upon  it  under 
paragraph  two  of  section  five  hundred  and  one  to  the  col- 
lector of  internal  revenue  of  the  district  in  which  the  prin- 
cipal office  or  place  of  business  is  located.  Such  returns 
shall  contain  such  information,  and  be  made  in  such  man- 
ner, as  the  Commissioner  of  Internal  Revenue,  with  the 
approval  of  the  Secretary  of  the  Treasury,  may  by  reg- 
ulation prescribe. 

Sec.  504.  That  from  and  after  the  first  day  of  Novem- 
ber, nineteen  hundred  and  seventeen,  there  shall  be  levied, 
assessed,  collected,  and  paid  the  following  taxes  on  the 
issuance  of  insurance  policies: 

(a)     Life  Insurance:     A  tax  equivalent  to  8  cents  on  \j^{^ 
each  $100  or  fractional  part  thereof  of  the  amount  for  Insurance 
which  any  life  is  insured  under  any  poUcy  of  insurance, 

[89] 


Officers  and 
Employes 
of  U.  S.  or 
States 


Returns 


or  other  instrument,  by  whatever  name  the  same  is  called: 
Provided y  Th&t  on  all  policies  for  life  insurance  only  by 
which  a  life  is  insured  not  in  excess  of  $500,  issued  on  the 
industrial  or  weekly  payment  plan  of  insurance,  the  tax 
shall  be  forty  per  centum  of  the  amount  of  the  first  weekly 
premium :  Provided  further y  That  policies  of  reinsurance 
shall  be  exempt  from  the  tax  imposed  by  this  subdivision. 

(b)  Marine,  Inland,  and  Fire  Insurance:  A  tax 
equivalent  to  1  cent  on  each  dollar  or  fractional  part 
thereof  of  the  premium  charged  under  each  policy  of  in- 
surance or  other  instrument  by  whatever  name  the  same 
is  called,  whereby  insurance  is  made  or  renewed  upon 
property  of  any  description  (including  rents  or  profits), 
whether  against  peril  by  sea  or  inland  waters,  or  by  fire 
or  lightning,  or  other  peril:  Provided^  That  policies  of 
reinsurance  shall  be  exempt  from  the  tax  imposed  by  this 
subdivision. 

(c)  Casualty  Insurance:  A  tax  equivalent  to  1  cent 
on  each  dollar  or  fractional  part  thereof  of  the  premium 
charged  under  each  policy  of  insurance  or  obligation  of 
the  nature  of  indemnity  for  loss,  damage,  or  liability 
(except  bonds  taxable  under  subdivision  two  of  schedule 
A  of  title  VIII)  issued  or  executed  or  renewed  by  any 
person,  corporation,  partnership,  or  association,  transact- 
mg  the  business  of  employer's  liability,  workmen's  com- 

Eensation,  accident,  health,  tornado,  plate  glass,  steam 
oiler,  elevator,  burglary,  automatic  sprinkler,  automo- 
bile, or  other  branch  of  insurance  (except  life  insurance, 
and  insurance  described  and  taxed  in  the  preceding  sub- 
division): Provided^  That  policies  of  reinsurance  be  ex- 
empt from  the  tax  imposed  by  this  subdivision. 

(d)  Policies  issued  by  any  person,  corporation,  part- 
nership, or  association,  whose  income  is  exempt  from  taxa- 
tion under  title  I  of  the  Act  entitled  "An  Act  to  increase 
the  revenue,  and  for  other  purposes, "  approved  Septem- 
ber eighth,  nineteen  hundred  and  sixteen,  shall  be  exempt 
from  the  taxes  imposed  by  this  section. 

Title  VI— Excise  Taxes 


Sec.  505.  That  every  person,  corporation,  partner- 
ship, or  association,  issuing  policies  of  insurance  upon  the 
issuance  of  which  a  tax  is  imposed  by  section  five  hundred 
and  four,  shall,  within  the  first  fifteen  days  of  each  month, 

[90] 


make  a  return  under  oath,  in  duplicate,  and  pay  such  tax 
to  the  collector  of  internal  revenue  of  the  district  in  which 
the  principal  office  or  place  of  business  of  such  person, 
corporation,  partnership,  or  association  is  located.  Such 
returns  shall  contain  such  information  and  "be  made  in 
such  manner  as  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury, 
may  by  regulation  prescribe. 

Sec.  600.  That  there  shall  be  levied,  assessed,  collected , 
and  paid — 

(a)  Upon  all  automobiles,  automobile  trucks,  auto- 
mobile wagons,  and  motorcycles,  sold  by  the  manufac- 
turer, producer,  or  importer,  a  tax  equivalent  to  three 
per  centum  of  the  price  for  which  so  sold;  and 

(b)  Upon  all  piano  players,  graphophones,  phono- 
graphs, talking  machines,  and  records  used  in  connection 
with  any  musical  instrument,  piano  player,  graphophone, 
phonograph,  or  talking  machine,  sold  by  the  manufacturer, 
producer,  or  importer,  a  tax  equivalent  to  three  per 
centum  of  the  price  for  which  so  sold;  and 

(c)  Upon  all  moving-picture  films   (which  have  not   Films 
been  exposed)   sold  by  the  manufacturer  or  importer, 

a  tax  equivalent  to  one-fourth  of  1  cent  per  linear  foot; 
and 

(d)  Upon    all    positive    moving-picture    films    (con-   Films 
taining  a  picture  ready  for  projection)  sold  or  leased  by 

the  manufacturer,  producer,  or  importer,  a  tax  equivalent 
to  one-half  of  1  cent  per  linear  foot;  and 

(e)  Upon    any    article    commonly    or    commercially   Jewelry 
known  as  jewelry,  whether  real  or  imitation,  sold  by  the 
manufacturer,  producer,  or  importer  thereof,  a  tax  equiv- 
alent to  three  per  centum  of  the  price  for  which  so  sold; 

and 


(f)  Upon  all  tennis  rackets,  golf  clubs,  baseball  bats, 
lacrosse  sticks,  balls  of  all  kinds,  including  baseballs, 
foot  balls,  tennis,  golf,  lacrosse,  billiard  and  pool  balls, 
fishing  rods  and  reels,  billiard  and  pool  tables,  chess 
and  checker  boards  and  pieces,  dice,  games  and  parts 
of  games,  except  playing  cards  and  children's  toys  and 
games,  sold  by  the  manufacturer,  producer,  or  importer, 
a  tax  equivalent  to  three  per  centum  of  the  price  for  which 
so  sold;  and 

[91] 


Sporting 
Goods, 
Games  and 
Toys 


(g)  Upon  all  perfumes,  essences^  extracts,  toilet  waters, 
cosmetics,  petroleum  jellies,  hair  oils,  pomades,  hair 
dressings,  hair  restoratives,  hair  dyes,  tooth  and  mouth 
washes,  dentrifices,  tooth  pastes,  aromatic  cachous^  toilet 
soaps  and  powders,  or  any  similar  substance,  article,  or 
preparation  by  whatsoever  name  known  or  distinguished, 
upon  all  of  the  above  which  are  used  or  applied  or  in- 
tended to  be  used  or  applied  for  toilet  purposes,  and 
which  are  sold  by  the  manufacture,  importer,  or  producer, 
a  tax  equivalent  to  two  per  centum  of  the  price  for 
which  so  sold;  and 

(h)  Upon  all  pills,  tablets,  powders,  tinctures,  troches 
or  lozenges,  sirups,  medicinal  cordials  or  bitters,  ano- 
dynes, tonics,  plasters,  liniments,  salves,  ointments,  pastes, 
drops,  waters  (except  those  taxed  under  section  three 
hundred  and  thirteen  of  this  Act),  essences,  spirits, 
oilsj  and  all  medicinal  preparations,  compounds,  or  com- 
positions whatsoever,  the  manufacturer  or  producer  of 
which  claims  to  have  any  private  formula,  secret,  or 
occult  art  for  making  or  preparing  the  same,  or  has  or 
claims  to  have  any  exclusive  right  or  title  to  the  making 
or  preparing  the  same,  or  which  are  prepared,  uttered, 
vended,  or  exposed  for  sale  under  any  letters  patent,  or 
trade-mark,  or  which,  if  prepared  by  any  formula,  pub- 
lished or  unpublished,  are  held  out  or  recommended  to  the 
public  by  the  makers,  venders,  or  proprietors  thereof  as 
proprietary  medicines  or  medicinal  proprietary  articles  or 
preparations,  or  as  remedies  or  specifics  for  any  disease, 
diseases,  or  affection  whatever  affecting  the  human  or 
animal  body,  and  which  are  sold  by  the  manufacturer, 
producer,  or  importer,  a  tax  equivalent  to  two  per 
centum  of  the  price  for  which  so  sold ;  and 

(i)  Upon  all  chewing  gum  or  substitute  therefor 
sold  by  the  manufacturer,  producer,  or  importer,  a  tax 
equivalent  to  two  per  centum  of  the  price  for  which  so 
sold;  and 

(i)  Upon  all  cameras  sold  by  the  manufacturer, 
producer,  or  importer,  a  tax  equivalent  to  three  per  cen- 
tum of  the  price  for  which  so  sold. 

Sec.  601.  That  each  manufacturer,  producer,  or 
importer  of  any  of  the  articles  enumerated  in  section 
six  hundred  shall  make  monthly  returns  under  oath 
in  duplicate  and  pay  the  taxes  imposed  on  such  articles 
by  this  title  to  the  collector  of  internal  revenue  for  the 
district  in  which  is  located  the  principal  place  of  business. 

[921 


Such  returns  shall  contain  such  information  and  can  bo  Returns 
made  at  such  times  and  in  such  manner  as  the  Com- 
missioner of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  may  by  regulations  prescribe. 

Sec.  602,  That  upon  all  articles  enumerated  in  sub- 
divisions (a),  (b),  (e),  (f),  (g),  (h),  (i),  or  (j)  of  section 
six  hundred,  which  on  the  day  this  Act  is  passed  are  held 
and  intended  for  sale  by  any  person,  corporation,  part- 
nership, or  association,  other  than  (1)  a  retailer  who  is 
not  also  a  wholesaler  or  (2)  the  manufacturer,  producer, 
or  importer  thereof,  there  shall  be  levied,  assessed,  col- 
lected, and  paid,  a  tax  equivalent  to  one-half  the  tax 
imposed  by  each  such  subdivision  upon  the  sale  of  the 
articles  therein  enumerated.  This  tax  shall  be  paid  by 
the  person,  corporation,  partnership,  or  association  so 
holding  such  articles. 

The  taxes  imposed  by  this  section  shall  be  assessed,   CoUectioB 
collected,  and  paid  in  the  same  manner  as  provided  in   of  Tax 
section  ten  hundred  and  two  in  the  case  of  additional 
taxes  upon  articles  upon  which  the  tax  imposed  by  existing 
law  has  been  paid. 

Nothing  in  this  section  shall  be  construed  to  impose 
a  tax  upon  articles  sold  and  delivered  prior  to  May  ninth, 
nineteen  hundred  and  seventeen,  where  the  title  is  re- 
served in  the  vendor  as  security  for  the  payment  of  the 
purchase  money. 

Sec.  603.  That  on  the  day  this  Act  takes  effect,  and  Boats  and 
thereafter  on  July  first  in  each  year,  and  also  at  the  time  Yachts 
of  the  original  purchase  of  a  new  boat  by  a  user,  if  on  any 
other  date  than  July  first,  there  shall  be  levied,  assessed, 
collected,  and  paid,  upon  the  use  of  yachts,  pleasure 
boats,  power  boats,  and  sailing  boats,  of  over  five  net  tons, 
and  motor  boats  with  fixed  engines,  not  used  exclusively 
for  trade  or  national  defense,  or  not  built  according  to 
plans  and  specifications  approved  by  the  Navy  Depart- 
ment, an  excise  tax  to  be  based  on  each  yacht  or  boat,  at 
rates  as  follows:  Yachts,  pleasure  boats,  power  boats, 
motor  boats  with  fixed  engines,  and  sailing  boats,  of  over 
five  net  tons,  length  not  over  fifty  feet,  50  cents  for  each 
foot,  length  over  fifty  feet  and  not  over  one  hundred  feet, 
$1.00  for  each  foot,  length  over  one  hundred  feet,  $2.00 
for  each  foot;  motor  boats  of  not  over  five  net  tons  with 
fixed  engines,  $5.00. 

[93] 


In  determining  the  length  of  such  yachts,  pleasure  boats* 
power  boats,  motor  boats  with  fixed  engines,  and  sailing 
boats,  the  measurement  of  over-all  length  shall  govern. 

In  the  case  of  a  tax  imposed  at  the  time  of  the  original 
purchase  of  a  new  boat  on  any  other  date  than  July  first, 
the  amount  to  be  paid  shall  be  the  same  number  of  twelfths 
of  the  amount  of  the  tax  as  the  number  of  calendar 
months,  including  the  month  of  sale,  remaining  prior  to 
the  following  July  first. 

Title  VII — War  Tax  on  Admissions 
and  Dues 

Sec.  700.  That  from  and  after  the  first  day  of  Nov- 
ember, nineteen  hundred  and  seventeen,  there  shall  be 
levied,  assessed,  collected,  and  paid  (a)  a  tax  of  1  cent 
for  each  10  cents  or  fraction  thereof  of  the  amount  paid  for 
admission  to  any  place,  including  admission  by  season 
ticket  or  subscription,  to  be  paid  by  the  person  paying  for 
such  admission:  Provided^  That  the  tax  on  admission  of 
children  under  twelve  years  of  age,  where  an  admis- 
sion charge  for  such  children  is  made,  shall  in  every 
case  be  1  cent;  and  persons  (except  bona  fide  em- 
ployees, municipal  officers  on  official  business,  and 
children  under  twelve  years  of  age)  admitted  free  to 
any  place  at  a  time  when  and  under  circumstances  under 
which  an  admission  charge  is  made  to  other  persons  of  the 
same  class,  a  tax  of  1  cent  for  each  10  cents  or  fraction 
thereof  of  the  price  so  charged  to  such  other  persons  for 
the  same  or  similar  accommodations,  to  be  paid  by  the 
persons  so  admitted;  and  (c)  a  tax  of  1  cent  for  each  10 
cents  or  fraction  thereof  paid  for  admission  to  any  public 
performance  for  profit  at  any  cabaret  or  other  similar 
entertainment  to  which  the  charge  for  admission  is  wholly 
or  in  part  included  in  the  price  paid  for  refreshment, 
service,  or  merchandise;  the  amount  paid  for  such  admis- 
sion to  be  computed  under  rules  prescribed  by  the  Com- 
missioner of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  such  tax  to  be  paid  by  the 
person  paying  for  such  refreshment,  service,  or  merchan- 
dise. In  the  case  of  persons  having  the  permanent  use  of 
boxes  or  seats  in  an  opera  house  or  any  place  of  amusement 
or  a  lease  for  the  use  of  such  box  or  seat  in  such  opera 
house  or  place  of  amusement,  there  shall  be  levied,  as- 
sessed, collected,  and  paid  a  tax  equivalent  to  ten  per 

[94] 


centum  of  the  amount  for  which  a  similar  box  or  seat 
is  sold  for  performance  or  exhibition  at  which  the  box 
or  seat  is  used  or  reserved  by  or  for  the  lessee  or  holder. 
These  taxes  shall  not  be  imposed  in  the  case  of  a  place  the 
maximum  charge  for  admission  to  which  is  5  cents,  or  in 
the  case  of  shows,  rides,  and  other  amusements  (the  maxi- 
mum charge  for  admission  to  which  is  10  cents)  within 
outdoor  general  amusement  parks,  or  in  the  case  of  ad- 
missions to  such  parks. 

No  tax  shall  be  levied  under  this  title  in  respect  to  any 
admissions  all  the  proceeds  of  which  inure  exclusively  to  the 
benefit  of  religious,  educational,  or  charitable  institutions, 
societies,  or  organizations,  or  admissions  to  agricultural 
fairs,  none  of  the  profits  of  which  are  distributed  to  stock- 
holders or  members  of  the  association  conducting  the  same. 

The  term  '^admission"  as  used  in  this  title  includes 
seats  and  tables,  reserved  or  otherwise,  and  other  similar 
accommodations,  and  the  charges  made  therefor. 

Sec.  701.  That  from  and  after  the  first  day  of  Novem- 
ber, nineteen  hundred  and  seventeen,  there  shall  be  levied, 
assessed,  collected,  and  paid,  a  tax  equivalent  to  ten  per 
centum  of  any  amount  paid  as  dues  or  membership  fees 
(including  initiation  fees),  to  any  social,  athletic,  or  sporting 
club  or  organization,  where  such  dues  or  fees  are  in  excess 
of  $12  per  year;  such  taxes  to  be  paid  by  the  person 
paying  such  dues  or  fees:  Provided,  That  there  shall  be 
exempted  from  the  provisions  of  this  section  all  amounts 
paid  as  dues  or  fees  to  a  fraternal  beneficiary  society, 
order,  or  association,  operating  under  the  lodge  system  or 
for  the  exclusive  benefit  of  the  members  of  a  fraternity 
itself  operating  under  the  lodge  system,  and  providing 
for  the  payment  of  life,  sick,  accident,  or  other  benefits 
to  the  members  of  such  society,  order,  or  association  or 
their  dependents. 

Sec.  702.  That  every  person,  corporation,  partner- 
ship, or  association  (a)  receiving  any  payments  for  such 
admission,  dues,  or  fees,  shall  collect  the  amount  of  the  tax 
imposed  by  section  seven  hundred  or  seven  hundred  and 
one  from  the  person  making  such  payments,  or  (b)  ad- 
mitting any  person  free  to  any  place  for  admission  to 
which  a  charge  is  made  shall  collect  the  amount  of  the 
tax  imposed  by  section  seven  hundred  from  the  person 
so  admitted,  and  (c)  in  either  case  shall  make  returns  and 
payments  of  the  amounts  so  collected,  at  the  same  time 

[95] 


Admissions 
Exempt 


Religious 
and 

Charitable 
Entertain- 
ments 

Admission 
Defined 

Dues 


Collection 
of  Tax 


and  in  the  same  manner  as  provided  in  section  five  hundred 
and  three  of  this  Act. 

Title  Vni— War  Stamp  Taxes 

Sec.  800.  That  on  and  after  the  first  day  of  Decem- 
ber, nineteen  hundred  and  8evente<*n,  there  shail  he  levied, 
collected,  and  paid,  for  and  in  respect  of  the  several  bonds, 
debentures,  or  certificates  of  stock  and  of  indebtedness 
and  other  documents,  instruments,  matters,  aod  things 
mentioned  and  described  in  Schedule  A  of  this  title,  or  for 
or  in  respect  of  the  vellum,  parchment,  or  paper  upon 
which  such  instruments,  mutters,  or  things,  or  any  of 
them,  are  written  or  printed,  by  any  person,  corporation, 
partnership,  or  association  who  makes,  signs,  issues, 
sols,  removes,  consigns,  or  ships  the  same,  or  for  whose 
use  or  benefit  the  same  are  made,  signed,  issued,  sold, 
removed,  consigned,  or  shipped,  the  several  taxes  specifiea 
in  S'lch  schedule. 

Sec.  801.  That  there  shall  not  be  taxed  under  this  title 
any  bond,  note,  or  other  instrument,  issued  by  the  United 
States,  or  by  any  foreign  Government,  or  by  any  State, 
Territory,  or  the  District  of  Columbia,  or  local  subdivi* 
sion  thereof,  or  municipal  or  other  corporation  exercising 
the  taxing  power,  when  issued  in  the  exercise  of  a  strictly 
governmental,  taxing,  or  municipal  function;  or  stocks  and 
bonds  issu'^d  by  cooperative  building  and  loan  associations 
which  are  organized  and  operated  exclusively  for  the  bene- 
fit of  their  members  and  make  loans  only  to  their  share 
holders,  or  by  mutual  ditch  or  irrigating  companies. 

Sec.  802.     That  whoever— 

(a)  Makes,  signs,  issues,  or  accepts,  or  causes  to  be 
made,  signed,  issued,  or  accepted,  any  instrument,  docu- 
ment, or  paper  of  any  kind  or  description  whatsoever 
without  the  full  amount  of  tax  thereon  being  duly  paid; 

(b)  Consigns  or  ships,  or  causes  to  be  consigned  or 
shipped,  by  parcel  post  any  parcel,  package,  or  article 
without  the  full  amount  of  tax  being  duly  paid; 

(c)  Manufacturers  or  imports  and  sells,  or  offers  for 
sale,  or  causes  to  be  manufactured  or  imported  and  sold,  or 
offered  for  sale,  any  playing  cards,  package,  or  other  article 
without  the  full  amount  of  tax  being  duly  paid; 

(d)  Makes  use  of  an  adhesive  stamp  to  denote  any  tax 
imposed  by  this  title  without  canceling  or  obliterating  such 
stamp  as  prescribed  in  section  eight  hundred  and  four; 

[96] 


Is  guilty  of  a  misdemeanor  and  upon  conviction  thereof 
shall  pay  a  fine  of  not  more  than  $100  for  each  offense. 

Sec.  803.    That  whoever— 

(a)  Fraudulently  cuts,  tears,  or  removes  from  any  vel- 
lum, parchment,  paper,  instrument,  writing,  package,  or 
article,  upon  which  any  tax  is  imposed  by  this  title,  any 
adhesive  stamp  or  the  impression  of  any  stamp,  die,  plate, 
or  other  article  provided,  made,  or  used  in  pursuance  of 
this  title;  (b)  Fraudulently  uses,  joins,  fixes,  or  places  to, 
with,  or  upon  any  vellum,  parchment,  paper,  instrument, 
writing,  package,  or  article,  upon  which  any  tax  is  im- 
posed by  this  title,  (1)  any  adhesive  stamp,  or  the  impres- 
sion of  any  stamp,  die,  plate,  or  other  article,  which  has 
been  cut,  torn,  or  removed  from  any  other  vellum,  parch- 
ment, paper,  instrument,  writing,  package,  or  article, 
upon  which  any  tax  is  imposed  by  this  title  or  (2)  any 
adhesive  stamp  or  the  impression  of  any  stamp,  die,  plate, 
or  other  article  of  insufficient  value;  or  (3)  any  forged  or 
counterfeit  stamp,  or  the  impression  of  any  forged  or 
counterfeited  stamp,  die,  plate,  or  other  article; 

(c)  Willfully  removes,  or  alters  the  cancellation,  or 
defacing  marks  of,  or  otherwise  prepares,  any  adhesive 
stamp,  with  intent  to  use,  or  cause  the  same  to  be  used, 
after  it  has  been  already  used,  or  knowingly  or  willfulty 
buys,  sells,  offers  for  sale,  or  gives  away,  any  such  washed 
or  restored  stamp  to  any  person  for  use,  or  knowingly  uses 
the  same; 

(d)  Knowingly  and  without  lawful  excuse  (the  burden 
of  proof  of  such  excuse  being  on  the  accused)  has  in  posses- 
sion any  washed,  restored,  or  altered  stamp,  which  has  been 
removed  from  any  vellum,  parchment,  paper,  instrument, 
writing,  package,  or  article. 

Is  guilty  of  a  misdemeanor,  and  upon  conviction  shall 
be  punished  by  a  fine  of  not  more  than  $1,000,  or  by  im- 
prisonment for  not  more  than  five  years,  or  both,  in  the 
discretion  of  the  court,  and  any  such  reused,  canceled,  or 
counterfeit  stamp  and  the  vellum,  parchment,  document, 
paper,  package,  or  article  upon  which  it  is  placed  or 
impressed  shall  be  forfeited  to  the  United  States. 

Sec.  804.  That  whenever  an  adhesive  stamp  is  used  for 
denoting  any  tax  imposed  by  this  title,  except  as  herein- 
after provided,  the  person,  corporation,  partnership,  or 
association  using  or  affixing  the  same  shall  write  or  stamp 
or  cause  to  be  written  or  stamped  thereupon  the  initials  of 

[97] 


his  or  its  name  and  the  date  upon  which  the  same  is  at- 
tached or  used,  so  that  the  same  may  not  again  be  used: 
Provided,  That  the  Commissioner  of  Internal  Revenue  may 
prescribe  such  other  method  for  the  cancellation  of  such 
stamps  as  he  may  deem  expedient. 

Sec.  805.  (a)  That  the  CJommissioner  of  Internal 
Revenue  shall  cause  to  be  prepared  and  distributed  for  the 
payment  of  the  taxes  prescribed  in  this  title  suitable  stamps 
denoting  the  tax  on  the  document,  article,  or  thing  to  which 
the  same  may  be  affixed,  and  shaU  prescribe  such  method 
for  the  affixing  of  said  stamps  in  substitution  for  or  in 
addition  to  the  method  provided  in  this  title,  as  he  may 
deem  ex-pedient. 

(b)  The  Commissioner  of  Internal  Revenue,  with  the 
approval  of  the  Secretary  of  the  Treasury,  is  authorised 
to  procure  any  of  the  stamps  provided  for  in  this  title  by 
contract  whenever  such  stamps  can  not  be  speedily  pre- 
pared by  the  Bureau  of  Engraving  and  Printing;  but  this 
authority  shall  expire  on  the  first  day  of  January,  nineteen 
hundred  and  eighteen,  except  as  to  imprinted  stamps  fur- 
nished under  contract,  authorized  by  the  Comnussioner  of 
Internal  Revenue. 

(c)  All  internal-revenue  laws  relating  to  the  assessment 
and  collection  of  taxes  are  hereby  extended  to  and  made  a 
part  of  this  title,  so  far  as  apphcable,  for  the  purpose  of 
collecting  stamp  taxes  omitted  through  mistake  or  fraud 
from  any  instrument,  document,  paper,  writing,  parcel, 
package,  or  article  named  herein. 

Sec.  806.  That  the  Commissioner  of  Internal  Revenue 
shall  furnish  to  the  Postmaster  General  without  prepay- 
ment a  suitable  quantity  of  adhesive  stamps  to  be  distri- 
buted to  and  kept  on  sale  by  the  various  postmasters  in  the 
United  States.  ITie  Postmaster  General  may  require  each 
such  postmaster  to  give  additional  or  increased  bond  as 
postmaster  for  the  value  of  the  stamps  so  furnished,  and 
each  such  postmaster  shall  deposit  the  receipts  from  the 
sale  of  such  stamps  to  the  credit  of  and  render  accounts  to 
the  Postmaster  General  at  such  times  and  in  such  form  as 
he  may  by  regulations  prescribe.  The  Postmaster  General 
shall  at  least  once  monthly  transfer  all  collections  from  this 
source  to  the  Treasury  as  internal-revenue  (collections.) 

Sec.  807.  That  the  collectors  of  the  several  districts 
shall  furnish  without  prepayment  to  any  assistant  treasurer 
or  designated  depository  of  the  United  States  located  in 

198] 


their  respective  collection  districts  a  suitable  quantity  of 
adhesive  stamps  for  sale.  In  such  cases  the  collector 
may  require  a  bond,  with  sufficient  sureties,  to  an  amount 
equal  to  the  value  of  the  adhesive  stamps  so  furnished, 
conditioned  for  the  faithful  return,  whenever  so  required, 
of  all  quantities  or  amounts  undisposed  of,  and  for  the 
payment  monthly  of  all  quantities  or  amounts  sold  or  not 
remaining  on  hand.  The  Secretary  of  the  Treasury  may 
from  time  to  time  make  such  regulations  as  he  may  find 
necessary  to  insure  the  safe-keeping  or  prevent  the  illegal 
use  of  all  such  adhesive  stamps. 


SCHEDULE  A.— STAMP  TAXES 

1.  Bonds  of  indebtedness:  Bonds,  debentures,  or  cer- 
tificates of  indebtedness  issued  on  and  after  the  first  day  of 
December,  nineteen  hundred  and  seventeen,  by  any 
person,  corporation,  partnership,  or  association,  on  each 
$100  of  face  value  or  fraction  thereof,  5  cents:  Provided, 
That  every  renewal  of  the  foregoing  shall  be  taxed  as  a 
new  issue:  Provided  further ,  That  when  a  bond  con- 
ditioned for  the  repayment  or  payment  of  money  is 
given  in  a  penal  sum  greater  than  the  debt  secured,  the  tax 
shall  be  based  upon  the  amount  secured. 

2.  Bonds,  indemnity  and  surety:  Bonds  for  indemnify- 
ing any  person,  corporation,  partnership,  or  corporation, 
who  shall  have  become  bound  or  engaged  as  surety,  and  all 
bonds  for  the  due  execution  or  performance  of  any  con- 
tract, obligation,  or  requirement,  or  the  duties  of  any 
office  or  position,  and  to  account  for  money  received  by 
virtue  thereof,  and  all  other  bonds  of  any  description,  ex- 
cept such  as  may  be  required  in  legal  proceedings,  not 
otherwise  provided  for  in  this  schedule,  50  cents:  Pro- 
vided, That  where  a  premium  is  charged  for  the  execution 
of  such  bond  the  tax  shall  be  paid  at  the  rate  of  one  per 
centum  on  each  dollar  or  fractional  part  thereof  of  the 
premium  charged:  Provided  further,  That  policies  of  re- 
insurance shall  be  exempt  from  the  tax  imposed  by  this 
subdivision. 

3.  Capital  stock,  issue:  On  each  original  issue,  whether 
on  organization  or  reorganization,  of  certificates  of  stock 
by  any  association,  company,  or  corporation,  on  each 
$100  of  face  value  or  fraction  thereof,  5  cents:  Provided, 
That  where  capital  stock  is  issued  without  face  value,  the 
tax  shall  be  5  cents  per  share,  unless  the  actual  value  is 

[99] 


Bonds  of 
Indebted- 


in  excess  of  $100  per  share.,  in  which  case  the  tax  shall  be  5 
cents  on  each  $100  of  actual  value  or  fraction  thereof. 

The  stamps  representing  the  tax  imposed  by  this 
subdivision  shall  be  attached  to  the  stock  books  and  not 
to  the  certificates  issued. 

4.  Capital  stock,  sales  or  transfers:  On  all  sales,  or 
agreements  to  sell,  or  memoranda  of  sales  or  deliveries  of, 
or  transfers  of  legal  title  to  shares  or  certificates  of  stock 
in  any  association,  company,  or  corporation,  whether 
made  upon  or  shown  by  the  books  of  the  association,  com- 
pany, or  corporation,  or  by  any  assignment  in  blank,  or  by 
any  deliver>',  or  by  any  paper  or  agreement  or  memoran- 
dum or  other  evidence  of  transfer  or  sale,  whether  entitling 
the  holder  in  any  manner  to  the  benefit  of  such  stock  or 
not,  on  each  $100  of  face  value  or  fraction  thereof,  2  cents, 
and  where  such  shares  of  stock  are  without  par  value,  the 
tax  shall  be  2  cents  on  the  transfer  or  sale  or  agreement  to 
sell  on  each  share,  unless  the  actual  value  thereof  is  in  ex- 
cess of  $100  per  share,  in  which  case  the  tax  shall  be  2  cents 
on  each  $100  of  actual  value  or  fraction  thereof:  Proxridedy 
That  it  is  not  intended  by  this  title  to  impose  a  tax  upon 
an  agreement  evidencing  a  deposit  of  stock  certificates  as 
collateral  security  for  money  loaned  thereon,  which  stock 
certificates  are  not  actually  sold,  nor  upon  such  stock 
certificates  so  deposited:  Provided  further ^  That  the 
tax  shall  not  be  imposed  upon  deliveries  or  transfers  to  a 
broker  for  sale,  nor  upon  deliveries  or  transfers  by  a  broker 
to  a  customer  for  whom  and  upon  whose  order  he  has  pur- 
chased same,  but  such  deliveries  or  transfers  shall  be  ac- 
companied by  a  certificate  setting  forth  the  facts:  Pro- 
vided further,  That  in  case  of  sale  where  the  evidence  of 
transfer  is  shown  only  by  the  books  of  the  company  the 
stamp  shall  be  placed  upon  such  books;  and  where  the 
change  of  owTiership  is  bj^  transfer  of  the  certificate  the 
stamp  shall  be  placed  upon  the  certificate;  and  in  cases  of 
an  agreement  to  sell  or  where  the  transfer  is  by  dehvery  of 
the  certificate  assigned  in  blank  there  shall  be  made  and 
delivered  by  the  seller  to  the  buyer  a  bill  or  memorandum 
of  such  sale,  to  which  the  stamp  shall  be  aflTixed;  and  every 
bill  or  memorandum  of  sale  or  agreement  to  sell  before 
mentioned  shall  show  the  date  thereof,  the  name  of  the 
seller,  the  amount  of  the  sale,  and  the  matter  or  thing  to 
which  it  refers.  Any  person  or  persons  liable  to  pay  the 
tax  as  herein  provided,  or  anyone  who  acts  in  the  matter  as 
agent  or  broker  for  such  person  or  persons  who  shall  make 
[100] 


any  such  sale,  or  who  shall  in  pursuanc3  of  ?iny  aacU  sale. 
deliver  any  stock  or  e^udence  o*f  the  sale  of  any  stock  or  bill 
or  memorandum  thereof,  as  herein  required,  without 
having  the  proper  stamps  affixed  thereto  with  intent  to 
evade  the  foregoing  provisions  shall  be  deemed  guilty  of  a 
misdemeanor,  and  upon  conviction  thereof  shall  pa>'  a  fine 
of  not  exceed.ing  $1,000,  or  be  imprisoned  not  more  than 
six  months,  or  both,  at  the  discretion  of  the  court. 

5.  Produce,  sales  of,  on  exchange:  Upon  each  sale.  Sales  of 
agreement  of  sale,  or  agreement  to  sell,  including  so-called  Produce 
transferred  or  scratch  sales,  any  products  or  merchandise 
at  any  exchange,  or  board  of  trade,  or  other  similar  place, 
for  future  delivery,  for  each  $100  in  value  of  the  merchan- 
dise covered  by  said  sale  or  agreement  of  sale  or  agreement 
to  sell,  2  cents,  and  for  each  additional  $100  or  fractional 
part  thereof  in  excess  of  $100,  2  cents:  Provided^  That  on 
every  sale  or  agreement  of  sale  or  agreement  to  sell  as 
aforesaid  there  shall  be  made  and  delivered  by  the  seller 
to  the  buyer  a  bill,  memorandum,  agreement,  or  other 
evidence  of  such  sale,  agreement  of  sale,  or  agreement  to 
sell,  to  which  there  shall  be  affixed  a  lawful  stamp  or  stamps 
in  value  equal  to  the  amount  of  the  tax  on  such  sale: 
Provided  furtheTy  That  sellers  of  commodities  described 
herein,  having  paid  the  tax  provided  by  this  subdivision, 
may  transfer  such  contracts  to  a  clearing  house  corpora- 
tion or  association,  and  such  transfer  shall  not  be  deemed 
to  be  a  sale,  or  agreement  of  sale,  or  an  agreement  to  sell 
within  the  provisions  of  this  Act,  provided  that  such 
transfer  shall  not  vest  any  beneficial  interest  in  such 
clearing  house  association  but  shall  be  made  for  the  sole 
purpose  of  enabling  such  clearing  house  association  to 
adjust  and  balance  the  accounts  of  the  members  of  said 
clearing  house  association  on  their  several  contracts. 
And  every  such  bill,  memorandum,  or  other  evidence  of 
sale  or  agreement  to  sell  shall  show  the  date  thereof,  the 
name  of  the  seller^  the  amount  of  the  sale,  and  the  matter 
or  thing  to  which  it  refers;  and  any  person  or  persons  liable 
to  pay  the  tax  as  herein  provided,  or  anyone  who  acts  in 
the  matter  as  agent  or  broker  for  such  person  or  persons, 
who  shall  make  any  such  sale  or  agreement  of  sale,  or 
agreement  to  sell,  or  who  shall,  in  pursuance  of  any  suqh 
sale,  agreement  of  sale,  or  agreement  to  sell,  deliver  any 
such  products  or  merchandise  without  a  bill,  memoran- 
dum, or  other  evidence  thereof  as  herein  required,  or  who 
shall  deliver  such  bill,  memorandum,  or  other  evidence  of 
[101] 


Drafts  and 
Checks 


SJ^ls,  or  agreeDjeot  to  sell,  without  having  the  proper 
stamps  affixed  thereto,  with  intent  to  evade  the  fore- 
going provisions,  shall  be  deemed  guilty  of  a  misdemeanor, 
and  upon  conviction  thereof  shall  pay  a  fine  of  not  exceed- 
ing $1,000,  or  be  imprisoned  not  more  than  six  months,  or 
both,  at  the  discretion  of  the  court. 

That  no  bill,  memorandum,  agreement,  or  other  evidence 
of  such  sale,  or  agreement  of  sale,  or  agreement  to  sell,  in 
case  of  cash  sales  of  products  or  merchandise  for  immediate 
or  prompt  delivery  which  in  good  faith  are  actually 
intended  to  be  deUvered  shall  be  subject  to  this  tax. 

6.  Drafts  or  checks  payable  otherwise  than  at  sight  or 
on  demand,  promissory  notes,  except  bank  notos  Issued 
for  circulation,  (and  for  each  renewal  of  the  same),  for  a 
sum  not  exceeding  $100,  2  cents;  and  for  each  additional 
$100  or  fractional  part-  thereof,  2  cents. 
Couveyances  7.  Conversance:  Deed,  instrument,  or  writing,  whereby 
any  lands,  tenements,  or  other  realty  sold  shall  be  granted, 
assigned,  transferred,  or  otherwise  convej'ed'to,  or  vested 
in,  the  purchaser  or  purchasers,  or  any  other  person  or 
persons,  by  his,  her,  or  their  direction,  when  the  consider- 
ation or  value  of  the  interest  or  property  conveyed,  ex- 
clusive of  the  value  of  any  lien  or  encumbrance  remaining 
thereon  at  the  time  of  sale,  exceeds  $100  and  doe?  not  ex- 
ceed $500,  50  cents;  and  for  each  additional  $500  or 
fractional  part  thereof  50  cents:  Provided,  That  nothing 
contained  in  this  paragraph  shall  be  so  construed  as  to 
impose  a  tax  upon  any  instrument  or  writing  given  to 
secure  a  debt. 

8.  Entry  of  any  goods,  wares,  or  merchandise  at  any 
custom-house,  either  for  consumption  or  warehousing, 
not  exceeding  $100  in  value,  25  cents;  exceeding  $100  ana 
not  exceeding  $500  in  value,  50  cents;  exceeding  $500  in 
value,  $1. 

9.  Entry  for  the  withdrawal  of  any  goods  or  merchan- 
dise from  customs  bonded  warehouse,  50  cents. 

10.  Passage  ticket,  one  way  or  round  trip,  for  each 
passenger,  sold  or  issued  in  the  United  States  for  passage  by 
any  vessel  to  a  port  or  place  not  in  the  United 
States,  Canada,  or  Mexico,  if  costing  not  exceeding  $30, 
$1;  costing  more  than  $30  and  not  exceeding  $60,  $3; 
costing  more  than  $60,  $5:  Provided,  That  such  passage 
tickets,  costing  $10  or  less,  shall  be  exempt  from  taxa- 
tion. 

[102] 


Entries 


Passage 
TickeU 


Powers  of 
Attorney 


11.  Proxy  for  voting  at  any  election  for  officers,  or  Proxies 
meeting  for  the  transaction  of  business,  of  any  incorporated 
company  or  association,  except  religious,  educational,  char- 
itable,   fraternal,  or   literary  societies,  or  public  ceme- 
teries, 10  cents. 

12.  Power  of  attorney  granting  authority  to  do  or  per- 
form some  act  for  or  in  behalf  of  the  grantor,  which  author- 
ity is  not  otherwise  vested  in  the  grantee,  25  cents:  Pro- 
mdedy  That  no  stamps  shall  be  required  upon  any  papers 
necessary  to  be  used  for  the  collection  of  claims  from  the 
United  States  or  from  any  State  for  pensions,  back  pay, 
bounty,  or  for  property  lost  in  the  military  or  naval  ser- 
vice or  upon  powers  of  attorney  required  in  bankruptcy 
cases. 

13.  Playing  cards:  UpoK  every  pack  of  playing  cards 
containing  not  more  than  fif ty-iour  cards,  manufactured  or 
imported,  and  sold,  or  removed  for  consumption  or  sale, 
after  the  passage  of  this  Act,  a  tax  of  5  cents  per  pack  in 
addition  to  the  tax  imposed  under  existing  law. 

14.  Parcel-post  packages:  Upon  every  parcel  or  pack- 
age transported  from  one  point  in  the  United  States  to 
another  by  parcel  post  on  which  the  postage  amounts  to 
25  cents  or  more,  a  tax  of  1  cent  for  each  25  cents  or  frac- 
tional part  thereof  charged  for  such  transportation,  to 
be  paid  by  the  consignor. 

No  such  parcel  or  package  shall  be  transported  until 
a  stamp  or  stamps  representing  the  tax  due  shall  have  been 
affixed  thereto. 


Playing 
Cards 


Parcel  Post 


Title  IX— War  Estate  Tax 

Sec.  900.  That  in  addition  to  the  tax  imposed  by 
section  two  hundred  and  one  of  the  Act  entitled  "An 
Act  to  increase  the  revenue,  and  for  other  purposes," 
approved  September  eighth,  nineteen  hundred  and  six- 
teen, as  amended — 

(a)  A  tax  equal  to  the  following  percentages  of  its  Rates  of  Tax 
value  is  hereby  imposed  upon  the  transfer  of  each  net 
estate  of  every  decedent  dying  after  the  passage  of  this 
Act,  the  transfer  of  which  is  taxable  under  such  section 
(the  value  of  such  net  estate  to  be  determined  as  provided 
in  Title  II  of  such  Act  of  September  eighth,  nineteen 
hundred  and  sixteen) : 

One-half  of  one  per  centum  of  the  amount  of  such  net 
estate  not  in  excess  of  $50,000. 

[103] 


One  per  centum  of  the  amount  by  which  such  net 
estate  exceeds  $oO,000  and  does  not  exceed  $150,000. 

One  and  one-half  per  centum  of  the  amount  by  which 
such  net  estate  exceeds  $150,000  and  does  not  exceed  $250,- 
000. 

Two  per  centum  of  the  amount  by  which  such  net 
estate  exceeds  $250,000  and  does  not  exceed  $450,000. 

Two  and  one-half  per  centum  of  the  amount  by  which 
such  net  estate  exceeds  $450,000  and  does  not  exceed 
$1,000,000. 

Three  per  centum  of  the  amount  by  which  such  net 
estate  exceeds  $1,000,000  and  does  not  exceed  $2,000,000. 

Three  and  one-half  per  centum  of  the  amount  by  which 
such  net  estate  exceeds  $2,000,000  and  does  exceed  $3,000,- 
000. 

Four  per  centum  of  the  amount  by  which  such  net 
estate  exceeds  $3,000,000  and  does  not  exceed  $4,000,000. 

Four  and  one-half  per  centum  of  the  amount  by  which 
such  net  estate  exceeds  $4,000,000  and  does  not  exceed 
$5,000,000. 

Five  per  centum  of  the  amount  by  which  such  net  esiate 
exceeds  $5,000,000  and  does  not  exceed  $8,000,000. 

Seven  per  centum  of  the  amount  by  which  such  net 
estate  exceeds  $8,000,000  and  does  not  exceed  $10,000,000; 
and 

Ten  per  centum  of  the  amount  by  which  such  net  estate 
exceeds  $10,000,000. 

Sec.  901.  That  the  tax  imposed  by  this  title  shall  not 
apply  to  the  transfer  of  the  net  estate  of  any  decedent 
dymg  while  serving  in  the  military  or  naval  forces  of  the 
United  States,  during  the  continuance  of  the  war  in  which 
the  United  States  is  now  engaged,  or  if  death  results  from 
injuries  received  or  disease  contracted  in  such  service, 
within  one  year  after  the  termination  of  such  war.  For 
the  purposes  of  this  section  the  termination  of  the  war 
shall  be  evidenced  by  the  proclamation  of  the  President. 

Title  X  -Administrative  Provisions 

Sec.  1000.  That  there  shall  be  levied,  collected,  and  paid 
in  the  United  States,  upon  articles  coming  into  the  United 
States  from  the  West  Indian  Islands  acquired  from  Den- 
mark, a  tax  equal  to  the  internal-revenue  tax  imposed  in 

[104] 


the  United  Stated  upon  like  articles  of  domestic  manufac- 
ture; such  articles  shipped  from  said  islands  to  the  United 
States  shall  be  exempt  from  the  payment  of  any  tax  im- 
posed by  the  internal-revenue  laws  of  said  islands:  Pro- 
vided, That  there  shall  be  levied,  collected,  and  paid  in  said 
islands,  upon  articles  imported  from  the  United  States, 
a  tax  equal  to  the  internal-revenue  tax  imposed  in  said 
islands  upon  like  articles  there  manufactured;  and  sach 
articles  going  into  said  islands  from  the  United  States 
shall  be  exempt  from  payment  of  any  tax  imposed  by  the 
internal-revenue  laws  of  the  United  States. 

Sec.  1001.  That  all  administrative,  special,  or  stamp 
provisions  of  law,  including  the  law  relatmg  to  the  assess- 
ment of  taxes,  so  far  as  applicable,  are  hereby  extended 
to  and  made  a  part  of  this  Act,  and  every  person,  corpora- 
tion, partnership,  or  association  liable  to  any  tax  imposed 
by  this  Act,  or  for  the  collection  thereof,  shall  keep  such 
records  and  render,  under  oath,  such  statements  and  re- 
turns, and  shall  comply  with  such  regulations  as  the  Com- 
mi&sioner  of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  may  from  time  to  time  prescribe. 

Sec.  1002.  That  where  additional  taxes  are  im- 
posed by  this  Act  upon  articles  or  commodities,  upon  which 
the  tax  imposed  by  existing  law  has  been  paid,  the  person, 
corporation,  partnership,  or  association  required  by  this 
Act  to  pay  the  tax  shall,  within  thirty  days  after  its 
passage,  make  return  under  oath  in  such  form  and  under 
such  regulations  as  the  Commissioner  of  Internal  Revenue 
with  the  approval  of  the  Secretary  of  the  Treasury  shall 
prescribe.  Payment  of  the  tax  shown  to  be  due 
may  be  extended  to  a  date  not  exceeding  seven  months  from 
the  passage  of  this  Act,  upon  the  filing  of  a  bond  for 
payment  in  such  form  and  amount  and  with  such  sureties 
as  the  Commissioner  of  Internal  Revenue,  with  the  appro- 
val of  the  Secretary  of  the  Treasury,  may  prescribe. 

Sec.  1003.  That  in  all  cases  where  the  method 
of  collecting  the  tax  imposed  by  this  Act  is  not  specifically 
provided,  the  tax  shall  be  collected  in  such  manner  as  the 
Commissioner  of  Internal  Revenue  with  the  approval  of 
the  Secretary  of  the  Treasury  may  prescribe.  All  admin- 
istrative and  penalty  provisions  of  Title  VIII  of  this  Act, 
in  so  far  as  applicable,  shall  apply  to  the  collection  of  any 
tax  which  the  Commissioner  of  Internal  Revenue  deter- 
mines or  prescribes  shall  be  paid  by  stamp. 

[105] 


Admifistra- 
tive  Provi- 
sions of  Law 
Applicable 


Payment  of 

Additional 

Taxes 


Collection  of 
Taxes 


Regulations 


Use  of 
Stamps  on 
Hand 


Penalty  for  Sec.  1004.  That  whoever  fails  to  make  any  return 
Failure  to  required  by  this  Act  or  the  regulations  made  under  author- 
Make  Return  ity  thereof  within  the  time  prescribed  or  who  makes  any 
false  or  fraudulent  return,  and  whoever  evades  or  attempts 
to  evade  any  tax  imposed  by  this  Act  or  fails  to  collect  or 
tnil^  to  account  for  and  pay  over  any  such  tax^  shall  be 
subject  to  a  penalty  of  not  more  than  $1,000,  or  to  imprison- 
ment for  not  more  than  one  year,  or  both,  at  the  discretion 
of  the  court,  and  in  addition  thereto  a  penalty  of  double  the 
tax  evaded,  or  not  collected,  or  accounted  for  and  paid  over, 
to  be  assessed  and  collected  in  the  same  manner  as  taxes 
are  assessed  and  collected,  in  any  case  in  which  the  pun- 
ishment is  not  otherwise  specifically  provided. 

Sec.  1005.  That  the  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the  Treas- 
ury, is  hereby  authorized  to  make  all  needful  rules  and 
regulations  for  the  enforcement  of  the  provisions  of  this 
Act. 

Sec.  1006.  That  where  the  rate  of  tax  imposed  by 
this  Act,  payable  by  stamps,  is  an  increase  over  previously 
existing  rates,  stamps  on  hand  in  the  collectors'  offices  and 
in  the  Bureau  of  Internal  Revenue  may  continue  to  be 
used  until  the  supply  on  hand  is  exhausted,  but  shall  be 
sold  and  accounted  for  at  the  rates  provided  by  this  Act, 
and  assessment  shall  be  made  against  manufacturers  and 
other  taxpayers  having  such  stamps  on  hand  on  the  day 
this  Act  takes  effect  for  the  difference  between  the  amount 
paid  for  such  stamps  and  the  tax  due  at  the  rates  provided 
by  this  Act. 
Contracts  Sec.  1007.    That  (a)  if  any  person,  corporation,  part- 

Made  Prior  nership,  or  association  has  prior  to  May  ninth,  nineteen 
to  May  9, 1917  hundred  and  seventeen,  made  a  bona  fide  contract  with 
a  dealer  for  the  sale,  after  the  tax  takes  effect,  of  any 
article  (or,  in  the  case  of  moving-picture  films,  such  a 
contract  with  a  dealer,  exchange,  or  exhibitor,  for  the  sale 
or  lease  thereof)  upon  which  a  tax  is  imposed  under  Title 
III,  IV,  or  VI,  or  under  subdivision  thirteen  of  Schedule  A 
of  Title  VIII,  or  under  this  section,  and  (b)  if  such  contract 
does  not  permit  the  adding  of  the  whole  of  such  tax  to  the 
amount  to  be  paid  under  such  contract,  then  the  vendee 
or  lessee  shall,  in  lieu  of  the  vendor,  or  lessor,  pay  so  much 
of  such  tax  as  is  not  so  permitted  to  be  added  to  the  con- 
tract price. 

The  taxes  payable  by  the  vendee  or  lessee  under  this 
section  shall  be  paid  to  the  vendor  or  lessor  at  the  time 
[106] 


the  sale  or  lease  is  consummated,  and  collected,  returned,  and 
paid  to  the  United  States  by  such  vendor  or  lessor  in  the 
same  manner  as  provided  in  section  five  hundred  and  three. 

The  term  ^'dealer"  as  used  in  this  section  includes  a 
vendee  who  purchases  any  article  with  intent  to  use  it  in 
the  manufacture  or  production  of  another  article  intended 
for  sale. 

Sec.  1008.  That  in  the  payment  of  any  tax  under 
this  Act  not  payable  by  stamp  a  fractional  part  of  a 
cent  shall  be  disregarded  unless  it  amounts  to  one-half 
cent  or  more,  in  which  case  it  shall  be  increased  to  one  cent. 

Sec.  1009.  That  the  Secretary  of  the  Treasury,  under 
rules  and  regulations  prescribed  by  him,  shall  permit  tax- 
payers liable  to  income  and  excess  profits  taxes  to  make 
payments  in  advance  in  installments  or  in  whole  of  an 
amount  not  in  excess  of  the  estimated  taxes  which  will 
be  due  from  them,  and  upon  determination  of  the  taxes 
actually  due  any  amount  paid  in  excess  shall  be  refunded 
as  taxes  erroneously  collected:  Provided,  That  when  pay- 
ment is  made  in  installments  at  least  one-fourth  of  such 
estimated  tax  shall  be  paid  before  the  expiration  of  thirty 
days  after  the  close  of  the  taxable  year,  at  least  an  addi- 
tional one-fourth  within  two  months  after  the  close  of  the 
taxable  year,  at  least  an  additional  one-fourth  within 
four  months  after  the  close  of  the  taxable  year,  and  the 
remainder  of  the  tax  due  on  or  before  the  time  now  fixed 
by  law  tor  such  payment:  Provided  further ,  that  the  Sec- 
retary of  the  Treasury,  under  rules  and  regulations  pre- 
scribed by  him,  may  allow  credit  against  such  taxes  so 
paid  in  advance  of  an  amount  not  exceeding  three  per  cent- 
um per  annum,  calculated  upon  the  amount  so  paid  from 
the  date  of  such  payment  to  the  date  now  fixed  by  law 
for  such  payment;  but  no  such  credit  shall  be  allowed  on 
payments  in  excess  of  taxes  determined  to  be  due,  nor  on 
payments  made  after  the  expiration  of  four  and  one-half 
months  after  the  close  of  the  taxable  year.  All  penalties 
provided  by  existing  law  for  failure  to  pay  tax  when  due  are 
hereby  made  applicable  to  any  failure  to  pay  the  tax  at 
the  time  or  times  required  in  this  section. 

Sec.  1010.  That  under  rules  and  regulations  prescribed 
by  the  Secretary  of  the  Treasury,  collectors  of  internal 
revenue  may  receive,  at  par  and  accrued  interest,  certi- 
ficates of  indebtedness  issued  under  section  six  of  the  Act 
entitled  **  An  Act  to  authorize  an  issue  of  bonds  to  meet  ex- 

(1071 


Dealer 
Defined 


Fraction  of 
Cent 

Payment  in 
Installments 


Certificates  penditures  for  the  national  security  and  defense,  and,  for 
of  Indebted-  the  purpose  of  assisting  in  the  prosecution  of  the  war, 
ness  and  to  extend  credit  to  foreign  governments,  and  for  other  pur- 

Uncertified  poses, "  approved  April  twenty -fourth,  nineteen  hundred 
Checks  and  seventeen,  and  any  subsequent  Act  or  Acts,  and  un- 

Received  in  certified  checks  in  payment  of  income  and  excess  profits 
Payment  taxes,  during  such  time  and  under  such  regulations  as  the 

of  Taxes  Commissioner  of  Internal  Revenue,   with  the  approval 

of  the  Secretary  of  the  Treasiuy,  shall  prescribe;  but  if  a 
check  so  received  is  not  paid  by  the  bank  on  which  it  is 
drawn  the  person  by  whom  such  check  has  been  tendered 
shall  remain  liable  for  the  payment  of  the  tax  and  for 
all  legal  penalties  and  additions  the  same  as  if  such  check 
had  not  been  tendered. 


Title  XI— Postal  Rates 

First  Class  Sec.  1100.     That  the  rate  of  postage  on  all  mail  matter 

of  the  first  class,  except  postal  cards,  shall,  thirty'  days 
after  the  passage  of  this  Act  be,  in  addition  to  the  existing 
rate,  1  cent  for  each  ounce  or  fraction  thereof:  Provided, 
That  the  rate  of  postage  on  drop  letters  of  the  first  class 
shall  be  2  cents  an  ounce  or  fraction  thereof.  Postal 
cards,  and  private  mailing  or  post  cards  when  complying 
with  the  requirements  of  existing  law,  shall  be  transmitted 
through  the  mails  at  1  cent  each  in  addition  to  the  exist- 
ng  rate. 
Soldiers'  That  letters  written  and  mailed  by  soldiers,  sailors,  and 

Mail  Free         marines  assigned  to  duty  in  a  foreign  country  engag:ed  in 
the  present  war  may  be  mailed  free  of  postage,  subject 
to  such  rules  and  regulations  as  may  be  prescribed  by  the 
Postmaster  General. 
Second  Class       Sec.  1101.     That   on   and   after   July   first,    nineteen 
Rates  hundred  and  eighteen,  the  rates  of  postage  on  publications 

entered  as  second-class  matter  (including  sample  copies 
to  the  extent  of  ten  per  centum  of  the  weight  of  copies 
mailed  to  subscribers  during  the  calendar  year)  when  sent 
by  the  publisher  thereof  from  the  post  office  of  publication 
or  other  post  office,  or  when  sent  by  a  news  agent  to  actual 
subscribers  thereto,  or  to  other  news  agents  for  the  pur- 
pose of  sale: 

(a)  In  the  case  of  the  portion  of  such  publication 
devoted  to  matter  other  than  advertisements,  shall  be  as 
follows:  (1)  on  and  after  July  first,  nineteen  hundred  and 

1108] 


ei 

ghteen,  and  imtii  July  first,  nineteen  hundred  and  nine- 
teen, 1  }4  cents  por  pound  or  fraction  thereof;  (2)  on  and 
after  July  first,  nineteen  hundred  and  nineteen,  \}/2  cents 
per  pound  or  fraction  thereof; 

(b)  In  the  case  of  the  portion  of  such  publication 
devoted  to  advertisements  the  rates  per  pound  or  fraction 
thereof  for  delivery  within  the  several  zones  applicable 
to  fourth-class  matter  shaU  be  as  follows  (but  where  the 
space  devoted  to  advertisements  does  not  exceed  five  per 
centum  of  the  total  space,  the  rate  of  postage  shall  be  the 
same  as  if  the  whole  of  such  publication  was  devoted  to 
matter  other  than  advertisements):  (1)  on  and  after 
July  first,  nineteen  hundred  and  eighteen,  and  until 
July  first,  nineteen  hundred  and  nineteen,  for  the  first 
and  second  zones,  IJ-^  cents;  for  the  third  zone,  1 J^  cents; 
for  the  fourth  zone,  2  cents;  for  the  fifth  zone,  234  cents; 
for  the  sixth  zone,  2J^  cents;  for  the  seventh  zone,  3 
cents;  for  the  eighth  zone,  834  cents;  (2)  on  and  after  July 
first,  nineteen  hundred  and  nineteen,  and  until  July  first, 
nineteen  hundred  and  twenty,  for  the  first  and  second 
zones,  13^  cents;  for  the  third  zone,  2  cents;  for  the  fourth 
zone,  3  cents;  for  the  fifth  zone,  33^^  cents;  for  the  sixth 
zone,  4  cents;  for  the  seventh  zone,  5  cents;  for  the  eighth 
zone,  b}/2  cents;  (3)  on  and  after  July  first,  nineteen 
hundred  and  twenty  and  until  July  first,  nineteen  hundred 
and  twenty-one,  for  the  first  and  second  zones,  1^  cents; 
for  the  third  zone,  23^  cents;  for  the  fourth  zone,  4  cents; 
for  the  fifth  zone,  4^4  cents;  for  the  sixth  zone,  53^  cents; 
for  the  seventh  zone,  7  cents;  for  the  eighth  zone,  1% 
cents;  (4)  on  and  after  July  first,  nineteen  hundred  and 
twenty-one,  for  the  first  and  second  zones,  2  cents  for  the 
third  zone,  3  cents:  for  the  fourth  zone,  5  cents;  for  the 
fifth  zone,  6  cents;  for  the  sixth  zone,  7  cents;  for  the 
seventh  zone,  9  cents;  for  the  eighth  zone,  10  cents. 

(c)  With  the  first  mailing  of  each  issue  of  each  such 
publication,  the  publisher  shall  file  with  the  postmaster 
a  copy  of  such  issue,  together  with  a  statement  containing 
such  information  as  the  Postmaster  General  may  pre- 
scribe for  determining  the  postage  chargeable  thereon. 

Sec.  1102.  That  the  rate  of  postage  on  daily  news- 
papers, when  the  same  are  deposited  m  a  letter  carrier 
oflRce  for  delivery  by  its  carriers,  shall  be  the  same  as  now 
provided  by  law;  and  nothing  in  this  title  shall  affect 
existing  law  as  to  free  circulation  and  existing  rates  on 

109  J 


second-class  mail  matter  within  the  county  of  publication : 
Provided^  That  the  Postmaster  General  may  hereafter 
require  publishers  to  separate  or  make  up  to  zones  in  such 
a  manner  as  he  may  direct  all  mail  matter  of  the  second 
class  when  offered  for  mailing. 
Keligious  Sec.  1103.     That  in  the  case  of  newspapers  and  periodi- 

and  cals  entitled  to  be  entered  as  second-class  matter    and 

Educational      maintained  by  and  in  the  interest  of  religious,  educational, 
Papers  scientific,  philanthropic,  agricultural,  labor,  or  fraternal 

organizations  or  associations,  not  organized  for  profit  and 
none  of  the  net  income  of  which  inures  to  the  benefit  of 
any  private  stockholder  or  individual,  the  second  class 
postage  rates  shall  be,  irrespective  of  the  zone  in  which 
delivered  (except  when  the  same  are  deposited  in  a  letter- 
carrier  office  for  dehvery  by  its  carriers,  in  which  ctise  the 
rates  shall  be  the  same  as  now  provided  by  law),  1 J^  cents 
a  pound  or  fraction  thereof  on  and  after  July  first,  nineteen 
hundred  and  eighteen,  and  until  July  first,  nineteen 
hundred  and  nineteen,  and  on  and  after  July  first,  nine- 
teen hundred  and  nineteen,  IJi  cents  a  pound  or  fraction 
thereof.  The  publishers  of  such  newspapers  or  periodicals 
before  being  entitled  to  the  foregoing  rates  shall  furnish 
to  the  Postmaster  General,  at  such  times  and  under  such 
conditions  as  he  may  prescribe,  satisfactory  evidence  that 
none  of  the  net  income  of  such  organization  inures  to  the 
benefit  of  any  private  stockholder  or  individual. 

Sec.  1104.  That  where  the  total  weight  of  any  one 
edition  or  issue  of  any  publication  mailed  to  any  one  zone 
does  not  exceed  one  pound,  the  rate  of  postage  shall  be  1 
cent. 

Sec.  1105.  The  zone  rates  provided  by  this  title  shall 
relate  to  the  entire  bulk  mailed  to  any  one  zone  and  not 
to  individually  addressed  packages. 

Sec.  1106.  That  where  a  newspaper  or  periodical  is 
mailed  by  other  than  the  publisher  or  his  agent  or  a  news 
agent  or  dealer,  the  rate  shall  be  the  same  as  now  pro- 
vided by  law. 

Sec.  1107.  That  the  Postmaster  General,  on  or  before 
the  tenth  day  of  each  month,  shall  pay  into  the  general 
fund  of  the  Treasury  an  amount  equal  to  the  difference 
between  the  estimated  amount  received  during  the  pre- 
ceding month  for  the  transportation  of  first  class  matter 
through  the  mails  and  the  estimated  amount  which  would 
have  been  received  under  the  provisions  of  the  law  in 
force  at  the  time  of  the  passage  of  this  Act.  * 

(110) 


Sec.  1108.     That  the  salaries  of  postmasters  at  offices   Salaries  of 
of  the  first,  second,  and  third  classes  shall  not  be  increased   Pogtmasters 
after  July  first,  nineteen  hundred  and  seventeen,  during 
the  existence  of  the  present  war.     The  compensation  of 
postmasters  at  offices  of  the  fourth  class  shall  continue  to 
be  computed  on  the  basis  of  the  present  rates  of  postage. 

Sec.  1109.     That  where  postmasters  at  offices  of  the   Allowances 
third  class  have  been  since  May  first,  nineteen  hundred   to  Third 
and  seventeen,  or  hereafter  are  granted  leave  without  pay   Class  Post 
for  military  purposes,  the  Postmaster  General  may  allow,    Offices 
in  addition  to  the  maximum  amounts  which  may  now  be 
allowed  such  offices  for  clerk  hire,  in  accordance  with  law, 
an  amount  not  to  exceed  fifty  per  centum  of  the  salary  of 
the  postmaster. 

Sec.  1110.  That  section  five  of  the  Act  approved  Ethyl 
March  third,  nineteen  hundred  and  seventeen,  entitled  Alcohol 
"An  Act  making  appropriations  for  the  Post  Office 
Department  for  the  year  ending  June  thirtieth,  nineteen 
hundred  and  eighteen,^'  shall  not  be  construed  to  apply 
to  ethyl  alcohol  for  governmental,  scientific,  medicinal, 
mechanical,  manufacturing,  and  industrial  purposes, 
and  the  Postmaster  General  shall  prescribe  suitable  rules 
and  regulations  to  carry  into  effect  this  section  in  connec- 
tion with  the  Act  of  which  it  is  amendatory,  nor  shall  said 
section  be  held  to  prohibit  the  use  of  the  mails  by  regularly 
ordained  ministers  of  religion;  or  by  officers  of  regularly 
established  churches,  for  ordering  wines  for  sacramental 
uses,  or  by  manufacturers  and  dealers  for  quoting  and 
billing  such  wines  for  such  purposes  only. 

Title  XII — Income  Tax  Amendments 

Sec.  1200.  That  subdivision  (a)  of  section  two  of  such 
Act  of  September  eighth,  nineteen  hundred  and  sixteen,  is 
hereby  amended  to  read  as  follows: 

"(a)  That,  subject  only  to  such  exemptions  and  de-  Net  Income 
ductions  as  are  hereinafter  allowed,  the  net  income  of  a 
taxable  person  shall  include  gains,  profits,  and  income,  de- 
rived from  salaries,  wages,  or  compensation  for  personal 
service  of  whatever  kind  and  in  whatever  form  paid,  or 
from  professions,  vocations,  businesses,  trade,  commerce, 
or  sales,  or  dealings  in  property,  whether  real  or  personal, 


[111] 


Interest  on 

C^vemment 

Bonds 


Interest 


Taxes 


growing  out  of  the  ownership  or  use  of  or  interest  in  real 
or  personal  property,  also  from  interest,  rent,  dividends, 
securities,  or  the  transaction  of  any  business  carried  on 
for  gain  or  profit,  or  gains  or  profits  and  income  derived 
from  any  source  whatever. 

Section  four  of  such  Act  of  September  eighth,  nineteen 
hundred  and  sixteen,  is  hereby  amended  to  read  as  fol- 
lows: 

*'Sec.  4.  The  following  income  shall  be  exempt  from 
the  provisions  of  this  title: 

"The  proceeds  of  life  insurance  policies  paid  to  indi- 
vidual beneficiaries  upon  the  death  of  the  insured;  the 
amount  received  by  the  insured,  as  a  return  of  premium 
or  premiums  paid  by  him  under  life  insurance,  endow- 
ment, or  annuity  contracts,  either  during  the  term  or  at 
the  maturity  of  the  term  mentioned  in  the  con'racl  or 
upon  surrender  of  the  contract;  the  value  of  property 
acquired  by  gift,  bequest,  devise,  or  descent  (but  the  in- 
come from  such  propertjr  shall  be  included  as  income): 
interest  upon  the  obligations  of  a  State  or  any  political 
subdivision  thereof  or  upon  the  obligations  of  the  United 
States  (but,  in  the  case  of  obligations  of  the  United  States 
issued  after  September  first,  nineteen  hundred  and  seven- 
teen, only  if  and  to  the  extent  provided  in  the  Act  authoriz- 
ing the  issue  thereof)  or  its  possessions  or  securities  issued 
under  the  provisions  of  the  Federal  Farm  Loan  Act  of 
July  8event,eenth,  nineteen  hundred  and  sixteen;  the 
compensation  of  the  present  President  of  the  United  States 
during  the  term  for  which  he  has  been  elected  and  the 
judges  of  the  supreme  and  inferior  courts  of  the  United 
States  now  in  office,  and  the  compensation  of  all  officers 
and  employees  of  a  State,  or  any  political  subdivision 
thereof,  except  when  such  compensation  is  paid  by  the 
United  States  Government/' 

Sec.  1201.  (1)  That  paragraphs  second  and  third  of 
subdivision  (a)  of  section  five  of  such  Act  of  September 
eighth,  nineteen  hundred  and  sixteen,  are  hereby  amended 
to  read  as  follows: 

"Second.  All  interest  paid  within  the  year  on  his  in- 
debtedness except  on  indebtedness  incurred  for  the  pur- 
chase of  obligations  or  securities  the  interest  upon  which 
is  exempt  from  taxation  as  income  under  this  title; 

"Third.  Taxes  paid  within  the  year  imposed  by  the  au- 
thority of  the  United  States  (except  income  and  excess 
profits  taxes)  or  of  its  Territories,  or  possessions,  or  any 

[112] 


foreign  country,  or  by  the  authority  of  any  State,  county, 
school  district,  or  municipality,  or  other  taxing  subdivision 
of  any  State,  not  including  those  assessed  against  local 
benefits;" 

(2)  Section  five  of  such  Act  of  September  eighth, 
nineteen  hundred  and  sixteen,  is  hereby  amended  by  adding 
at  the  end  of  pubdivision  (a)  a  further  paragraph  numbered 
nine,  to  read  as  follows: 

*' Ninth.  Contributions  or  gifts  actually  made  within 
the  year  to  corporations  or  associations  organized  and  op- 
erated exclusively  for  religious,  charitable,  scientific,  or 
educational  purposes,  or  to  societies  for  the  prevention  of 
cruelty  to  children  or  animals,  no  part  of  the  net  income 
of  which  inures  to  the  benefit  of  any  private  stockholder 
or  individual,  to  an  amount  not  in  excess  of  fifteen  per 
centum  of  the  taxpayer's  taxable  net  income  as  comput,ed 
without  the  benefit  of  this  paragraph.  Such  contribu- 
tions or  gifts  shall  be  allowable  as  deductions  only  if  veri- 
fied under  rules  and  regulations  prescribed  by  the  Com- 
missioner of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury." 

Sec.  1202.  That  (1)  paragraphs  second  and  third  of 
subdivision  (a)  of  section  six  of  such  Act  of  September 
eighth,  nineteen  hundred  and  sixteen,  are  hereby  amended 
to  read  as  follows: 

"Second.  The  proportion  of  all  interest  paid  within  th« 
year  by  such  person  on  his  indebtedness  (except  on  indebt- 
edness incurred  for  the  purchase  of  obligations  or  securi- 
ties the  interest  upon  which  is  exempt  from  taxation  as 
income  under  this  title)  which  the  gross  amount  of  his 
income  for  the  year  derived  from  sources  within  the  United 
States  bears  to  the  gross  amount  of  his  income  for  the 
year  derived  from  all  sources  within  and  without  the 
United  States,  but  this  deduction  shall  be  allowed  only 
if  such  person  includes  in  the  return  required  by  section 
eight  all   the  information  necessary  for  its  calculation; 

** Third.  Taxes  paid  within  the  year  imposed  by  the 
authority  of  the  United  States  (except  income  and  excess 
profits  taxes),  or  of  its  Territories,  or  possessions,  or  by  the 
authority  of  any  State,  county,  school  distri^ft.  or  munici- 
pality, or  other  taxing  subdivision  of  any  State,  paid 
withm  the  United  States,  not  including  those  assessed 
against  local  benefits:" 

[113] 


Contribu- 
tioRg  and 
Gifts 


Nonnreeident 
Aliens 


Interest 


Taxes 


Deductions 
and  Credits 
of  Non-Resi- 
dent Aliens 
Dependent 
Upon  Return 


Specific 
Exemptions 


(2)  Section  six  of  such  Act  of'September  eighth,  nineteen 
hundred  and  sixteen,  is  also  further  amended  by  adding  a 
a  new  subdivision  to  read  as  follows: 

**(c)  A  nonresident  alien  individual  shall  receive  the 
benefit  of  the  deductions  and  credits  provided  for  in  this 
section  only  by  filing  or  causing  to  be  filed  with  the  collector 
of  internal  revenue  a  true  and  accurate  return  of  his  total 
income,  received  from  all  sources,  corporate  or  otherwise,  in 
the  United  States,  in  the  manner  prescribed  by  this  title; 
and  in  case  of  his  failure  to  file  such  return  the  collector 
shall  collect  the  tax  on  such  income^  and  all  property 
belonging  to  such  nonresident  alien  mdividual  shall  be 
liable  to  distraint  for  the  tax." 

Sec.  1203.  (1)  That  section  seven  of  such  Act  of  Sep- 
tember eighth,  nineteen  hundred  and  sixteen,  is  hereby 
amended  to  read  as  follows: 

"Sec.  7.  That  for  the  purpose  of  the  normal  tax  only, 
there  shall  be  allowed  as  an  exemption  in  the  nature  of  a 
deduction  from  the  amount  of  the  net  income  of  each 
citizen  or  resident  of  the  United  States,  ascertained  as 
provided  herein,  the  sum  of  $3,000,  plus  $1,000  additional 
if  the  person  making  the  return  be  a  head  of  a  family  or  a 
married  man  with  a  wife  living  with  him,  or  plus  the  sum 
of  $1,000  additional  if  the  person  making  the  return  be 
a  married  woman  with  a  husband  living  with  her;  but  in 
no  event  shall  this  additional  exemption  of  $1,000  be 
deducted  by  both  a  husband  and  a  wife:  Provided,  That 
only  one  deduction  of  $4,000  shall  be  made  from  the  aggre- 
gate income  ot  both  husband  and  wife  when  living  together: 
Provided  further,  That  if  the  person  making  the  return  is 
the  head  of  a  family  there  shall  be  an  additional  exemption 
of  $200  for  each  child  dependent  upon  such  person,  if 
imder  eighteen  years  of  age,  or  if  incapable  ol  self-support 
because  mentally  or  physically  defective,  but  this  provi- 
sion shall  operate  only  in  the  case  of  one  parent  in  the  same 
family:  Provided  further,  That  guardians  or  trustees  shall 
be  allowed  to  make  this  personal  exemption  as  to  income 
derived  from  the  property  of  which  such  guardian  or  trustee 
has  charge  in  favor  of  each  ward  or  cestui  que  trust: 
Provided  further.  That  in  no  event  shall  a  ward  or  cestui 
que  trust  be  allowed  a  greater  personal  exemption  than  as 
provided  in  this  section  from  the  amount  of  net  income 
received  from  all  sources.  There  shall  also  be  allowed 
an   exemption  from   the   amount   of  the   net  income  of 

[114] 


estates  of  deceased  citizens  or  residents  of  the  United  States 
during  the  period  of  administration  or  settlement,  and  of 
trust  or  other  estates  of  citizens  or  residents  of  the  United 
States  the  income  of  which  is  not  distributed  annually  or 
regularly  under  the  provisions  of  subdivision  (b)^  of 
section  two,  the  sum  of  $3,000,  including  such  deductions 
as  are  allowed  under  section  five." 

(2)  Subdivision  (b)  of  section  seven  of  such  Act  of  Sep- 
tember eighth,  nineteen  hundred  and  sixteen,  is  hereby 
repealed. 

Sec.  1204.  (1)  That  subdivisions  Cc)  and  (e)  of  section 
eight  of  such  Act  of  September  eighth,  nineteen  himdred 
and  sixteen,  are  hereby  amended  to  read  as  follows: 

**  (c)  Guardians,  trustees,  executors,  administrators,  re- 
ceivers, conservators,  and  all  persons,  corporations,  or  asso-  Fiduciaries 
ciations,  acting  in  anj^  fiduciary  capacity,  shall  make  and 
render  a  return  of  the  income  of  the  person,  trust,  or  estate 
for  whom  or  which  they  act,  and  be  subject  to  all  the  pro- 
visions of  this  title  which  apply  to  individuals.  Such 
fiduciary  shall  make  oath  that  he  has  sufficient  knowledge 
of  the  affairs  of  such  person,  trust,  or  estate  to  enable  him 
to  make  such  return  and  that  the  same  is,  to  the  best  of 
his  knowledge  and  belief,  true  and  correct,  and  be  subject 
to  all  the  provisions  of  this  title  which  apply  to  individuals : 
Provided,  That  a  return  made  by  one  of  two  or  more  joint 
fiduciaries  filed  in  the  district  where  such  fiduciary  resides, 
under  such  regulations  as  the  Secretary  of  the  Treasury 
may  prescribe,  shall  be  a  sufficient  compliance  with  the 
requirements  of  this  paragraph:  Provided  further,  That 
no  return  of  income  not  exceeding  $3,000  shall  be  re- 
quired except  as  in  this  title  otherwise  provided. 

"(e)  Persons  carrying  on  business  in  partnership  shall 
be  liable  for  income  tax  only  in  their  individual  capacity,  Partnerships 
and  the  share  of  the  profits  of  the  partnership  to  which  any 
taxable  partner  would  be  entitled  if  the  same  were  divided, 
whether  divided  or  otherwise,  shall  be  returned  for  taxa- 
tion and  the  tax  paid  under  the  provisions  of  this  title: 
Provided,  Thsit  from  the  net  distributive  interests  on  which 
the  individual  members  shall  be  liable  for  tax,  normal  and 
additional,  there  shall  be  excluded  their  proportionate 
shares  received  from  interest  on  the  obligations  of  a  State 
or  any  poHtical  or  taxing  subdivision  thereof,  and  upon 
the  obligations  of  the  United  States  (if  and  to  the  extent 
that  it  is  provided  in  the  Act  authorizing  the  issue  of  such 

115] 


obligations  of  the  United  States  that  they  are  exc^mpt 
from  taxation)  and  its  possessions,  and  that  for  the  pur- 
pose of  computing  the  normal  tax  there  shall  be  al- 
lowed a  credit,  as  provided  by  section  five,  subdivision 
(b),  for  their  proportionate  share  of  the  profits  derived 
from  dividends.  Such  partnership,  when  requested  by 
the  Commissioner  of  Internal  Revenue  or  any  district 
collector,  shall  render  a  correct  return  of  the  earnings, 
profits,  and  income  of  the  partnership,  except  income 
exempt  under  section  four  of  this  Act,  setting  forth  the 
item  of  the  gross  income  and  the  deductions  and  credits 
allowed  by  this  title,  and  the  names  and  addresses  of  the 
individuals  who  would  be  entitled  to  the  net  earnings, 

Erofits,  and  income,  if  distributed.  A  partnership  shall 
ave  the  same  privilege  of  fixing  and  making  returns  upon 
the  basis  of  its  own  fiscal  year  as  is  accorded  to  corporations 
under  this  title.  If  a  fiscal  year  ends  during  nineteen 
hundred  and  sixteen  or  a  subsequent  calendar  3'ear  for 
which  there  is  a  rate  of  tax  different  from  the  rate  for  the 
preceding  calendar  year,  then  (1)  the  rate  for  such  pre- 
ceding calendar  year  shall  apply  to  an  amount  of  each 
partner's  share  of  such  partnership  profits  equal  to  the 
proportion  which  the  part  of  such  fiscal  year  falling  within 
such  calendar  year  bears  to  the  full  fiscal  year,  and  (2) 
the  rate  for  the  calendar  year  during  which  such  fiscal 
year  ends  shall  apply  io  the  remainder. 

(2)  Subdivision  (d)  of  section  eight  of  such  Act  of  Sep- 
tember eighth,  nineteen  hundred  and  sixteen,  is  hereby 
repealed. 

Sec.  1205.  (1)  That  subdivisions  (b),  (c),  (f),  and  (g)  of 
section  nine  of  such  Act  of  September  eighth,  nineteen 
hundred   and   sixteen,   are  hereby   amended   to   read   as 
follows: 
Deduction  at      u^y^^^  ^U   persons,    corporations,   fjartnerships,   associa- 
^ource  tions,   and   msurance   companies,   in   whatever  capacity 

mn-Aesident  acting,  including  lessees  or  mortgagors  of  real  or  personal 
''^^^^  property,  trustees  acting  in  any  trust  capacity,  executors, 

administrators,  receivers,  conservators,  employers,  and  all 
officers  and  employees  of  the  United  State**,  having  the  con- 
trol, receipt,  custody,  disposal,  or  payment  of  interest,  rent, 
salaries,  wages,  premmms,  annuities,  compensation, 
remuneration,  emoluments,  or  other  fixed  or  determina- 
ble annual  or  periodical  gains,  profits,  and  income  of 
any    nonresident    alien    individual,    other    than    income 

1116] 


derived  from  dividends  on  capital  stock,  or  from  the 
net  earninj!:8  of  a  corporation,  joint-fltock  company  or 
association,  or  insurance  company,  which  is  taxable  upon 
its  net  income  as  provided  in  this  title,  are  hereby  author- 
ized and  required  to  deduct  and  withhold  from  such  annual 
or  periodical  gains,  profits,  and  income  such  sum  as  will  be 
sufficient  to  pay  the  normal  tax  imjKDsed  thereon  by  this 
title,  and  shall  make  return  thereof  on  or  before  March 
first  of  each  year  and,  on  or  before  the  time  fixed  by  law 
for  the  payment  of  the  tax,  shall  pay  the  amount  with- 
held to  the  officer  of  the  United  States  Government 
authorized  to  receive  the  same;  and  they  are  each  hereby 
made  personally  liable  for  such  tax,  and  they  are  each 
hereby  indemnified  against  every  person,  corporation, 
partnership,  association,  or  insurance  company,  or  de- 
mand whatsoever  for  all  pa>Tnents  which  they  shall  make 
in  pursuance  and  by  virtue  of  this  title. 

"(c)  The  amount  of  the  normal  tax  hereinbefore  im- 
posed shall  also  be  deducted  and  withheld  from  fixed  or 
determinable  annual  or  periodical  gains,  profits,  and  in- 
come derived  from  interest  upon  bonds  and  mortgages, 
or  deeds  of  trust  or  other  similar  obligations  of  corpora- 
tions, joint-stock  companies,  associations,  and  insurance 
companies  (if  such  bonds,  mortgages,  or  other  obliga- 
tions contain  a  contract  or  provision  by  which  the  obligor 
agrees  to  pay  any  portion  of  the  tax  imposed  by  this  title 
upon  the  obligee  or  to  reimburse  the  obligee  for  any  por- 
tion of  the  tax  or  to  pay  the  interest  without  deduction 
for  any  tax  which  the  obligor  may  be  required  or  permitted 
to  pay  thereon  or  to  retain  therefrom  under  any  law  of  the 
United  States),  whether  payable  annually  or  at  shorter 
or  longer  periods  and  whether  such  interest  is  payable 
to  a  nonresident  alien  individual  or  to  an  individual 
citizen  or  resident  of  the  United  States,  subject  to  the 
provisions  of  the  foregoing  subdivision  (b)  of  this  section 
requiring  the  tax  to  be  withheld  at  the  source  and  deducted 
from  annual  income  and  returned  and  paid  to  the  Govern- 
ment, unless  the  person  entitled  to  receive  such  interest 
shall  file  with  the  withholding  agent,  on  or  before  Feb- 
ruary first,  a  signed  notice  in  writing  claiming  the  benefit 
of  an  exemption  under  section  seven  of  this  title. 

"  ^f)  All  persons,  corporations,  partnerships,  or  associa- 
tions, undertaking  as  a  matter  of  business  or  for  profit 
the  collection  of  foreign  payments  of  interest  or  dividends 

[117] 


Tax  Free 
Bonds 


Collectien  of 

Foreign 

Items 


Tax  Assessed 
by  Personal 
Return 


Corporation 
Tax  on 
Net  Income 


by  means  of  coupons,  checks,  or  bills  of  exchange  shall 
obtain  a  license  from  the  Commissioner  of  Internal 
Revenue,  and  shall  be  subject  to  such  regulations  enabling 
the  Government  to  obtain  the  information  required  under 
this  title,  as  the  Commissioner  of  Internal  Revenue,  with 
the  approval  of  the  Secretary  oi  the  Treasure',  shall  pre- 
scribe; and  whoever  knowingly  undertakes  to  "collect  such 
payments  as  aforesaid  without  having  obtained  a  license 
therefor,  or  without  complying  with  such  regulations, 
shall  be  deemed  guilty  of  a  misdemeanor  and  for  each 
offense  be  fined  in  a  sum  not  exceeding  $5,000,  or  imprisoned 
for  a  term  not  exceeding  one  year,  or  both,  in  the  discre- 
tion of  the  court. 

*'(g)  The  tax  herein  imposed  upon  gains,  profits,  and 
incomes  not  falling  under  the  foregoing  and  not  returned 
and  paid  by  virt.ue  of  the  foregoing  or  as  otherwise  pro- 
vided by  law  shall  be  assessed  by  personal  return  under 
rules  and  regulations  to  be  prescribed  by  the  Commis- 
sioner of  Internal  Revenue  and  approved  by  the  Secretary 
of  the  Treasury.  The  intent  and  purpose  of  this  title  is 
that  all  gains,  profits,  and  income  of  a  taxable  class,  as 
defined  by  this  title,  shall  be  charged  and  assessed  with  the 
corresponding  tax,  normal  and  additional,  prescribed 
b}*^  this  title,  and  said  tax  shall  be  paid  by  the  owner  of 
such  income,  or  the  proper  representative  having  the 
receipt,  custody,  control,  or  disposal  of  the  same.  For  the 
purpose  of  this  title  ownership  or  liability  shall  be  deter- 
mined as  of  the  year  for  which  a  return  la  required  to  be 
rendered. 

**The  provisions  of  this  section,  except  subdivision  (c), 
relating  to  the  deduction  and  payment  of  the  tax  at  the 
source  of  income  shall  only  apply  to  the  normal  tax  herein- 
before   imposed    upon    non-resident    alien    individuals. '* 

(2)  Subdivisions  (d)  and  (e)  of  section  nine  of  such 
Act  of  September  eighth,  nineteen  hundred  and  sixteen,  are 
hereby  repealed. 

Sec.  1206.  (1)  That  the  first  paragraph  of  section  ten'of 
such  Act  of  September  eighth,  nineteen  hundred  and  six- 
teen, is  hereby  amended  to  read  as  follows: 

*'Sec.  10.  (a)  That  there  shall  be  levied,  assessed,  col- 
lected, and  paid  annually  upon  the  total  net  income  re- 
ceived in  the  preceding  calendar  year  from  all  sources  by 
every  corporation,  joint-stock  company  or  association,  or 
insurance  company,  organized  in  the  United  States,  no 

[1181 


matter  how  created  or  organized,  but  not  including  part- 
nerships, a  tax  of  two  per  centum  upon  such  income;  and 
a  like  tax  shall  be  levied,  assessed,  collected,  and  paid 
annually  upon  the  total  net  income  received  in  the  pre- 
ceding calendar  year  from  all  soiu-ces  within  the  United 
States  by  every  corporation,  joint-stock  company  or  asso- 
ciation, or  insurance  company,  organized,  authorized,  or 
existing  under  the  laws  of  any  foreign  country,  including 
interest  on  bonds,  notes,  or  other  interest-bearing  obliga- 
tions of  residents,  corporate  or  otherwise,  and  including 
the  income  derived  from  dividends  on  capital  stock  or 
from  net  earnings  of  resident  corporations,  joint-stock  com- 
panies or  associations,  or  insurance  companies,  whose  net 
income  is  taxable  under  this  title. 

(2)  Section  ten  of  such  Act  of  September  eighth,  nine- 
teen hundred  and  sixteen,  is  hereby  further  amended  by 
adding  a  new  subdivision  as  follows : 

"(b)  In  addition  to  the  income  tax  imposed  by  sub-  Undistribut- 
division  (a)  ot  this  section  there  shall  be  levied,  assessed,  ed  Surplus 
collected,  and  paid  annually  an  additional  tax  of  ten  per 
centum  upon  the  amount  remaining  undistributed  six 
months  after  the  end  of  each  calendar  or  fiscal  year, 
of  the  total  net  income  of  every  corporation,  joint-stock 
company  or  association,  or  insurance  company,  received 
during  the  year,  as  determined  for  the  purposes  of  the  tax 
imposed  by  such  subdivision  (a),  but  not  including  the 
amount  of  any  income  taxes  paid  by  it  within  the  year 
imposed  by  the  authority  of  the  United  States. 

"The  tax  imposed  by  this  subdivision  shall  not  apply  to 
that  portion  of  such  undistributed  net  income  which  is 
actually  invested  and  employed  in  the  business  or  is  re- 
tained for  employment  in  the  reasonable  requirements  of 
the  business  or  is  invested  in  obligations  of  the  United 
States  issued  after  September  first,  nineteen  hundred  and 
seventeen:  Provided^  That  if  the  Secretary  of  the 
Treasury  ascertains  and  finds  that  any  portion  of  such 
amount  so  retained  at  any  time  for  employment  in  the 
business  is  not  so  employed  or  is  not  reasonably  required 
in  the  business  a  tax  of  fifteen  per  centum  shall  be  levied, 
assessed,  collected,  and  paid  thereon. 

The  foregoing  tax  rates  shall  apply  to  the  undistributed 
net  income  received  bjr  every  taxable  corporation,  joints 
stock  company  or  association,  or  insurance  company'  in  the 
calendar  year  nineteen  hundred  and  seventeen  and  in  each 

[119] 


year  thereafter,  except  that  if  it  has  fixed  its  own  fiscal 
year  under  the  provisions  of  existinj^  law,  the  foregoinp  rates 
shall  apply  to  the  proportion  of  the  taxable  undistributed 
net  income  returned  for  the  fiscal  year  ending  prior  to 
December  thirty-first,  nineteen  hundred  and  seventeen, 
which  the  period  between  January  first,  nineteen  hundred 
and  seventeen,  and  the  end  of  such  fiscal  year  bears  to  the 
whole  of  such  fiscal  year." 

Deductions,         Sec.  1207.  (1)  That  paragraphs  third   and   fourth  of 
Domestic  subdivision  (&)  of  section  twelve  of  such  Act  of  September 

Corporations   eighth,  nineteen  hundred  and  sixteen,  are  hereby  amended 

to  read  as  follows: 
laterest  "Third.     The  amount  of  interest  paid  within  the  year 

on  its  indebtedness  (except  on  indebtedness  incurred  for 
the  purchase  of  oVligations  or  securities  the  interest  upon 
which  is  exempt  from  taxation  as  income  under  this  title) 
to  an  amount  of  such  indebtedness  not  in  excess  of  the  sura 
of  (a)  the  entire  amount  of  the  paid-up  capital  stock  out- 
standing at  the  close  of  the  year,  or,  if  no  capital  stock,  the 
entire  amount  of  capital  employed  in  the  business  at  the 
close  of  the  year,  and  (b)  one-half  of  its  interest-bearing 
indebtedness  then  outstanding:  Provided^  That  for  the 
purpose  of  this  title  preferred  capital  stock  shall  not  be 
considered  interest-bearing  indebtedness,  and  interest  or 
dividend*  paid  upon  this  stock  shall  not  be  deductible 
from  gross  income:  Promded  fwrther,  That  in  cases 
wherein  shares  of  capital  stock  are  issued  without  par 
or  nominal  value,  the  amount  of  paid-up  capital  stock, 
within  the  meaning  of  this  section,  as  represented  by  such 
shares,  will  be  the  amount  of  cash,  or  its  equivalent,  paid 
or  transferred  to  the  corporation  as  a  consideration  for 
such  shares:  Provided  further,  That  in  the  case  of  indebt- 
edness wholly  secured  by  property  collateral,  tangible  or 
intangible,  the  subject  of  sale  or  hypothecation  in  the  ordin- 
ary business  of  such  corporation,  joint-stock  company'  or 
association  as  a  dealer  only  in  the  property  constituting 
such  collateral,  or  in  loaning  the  funds  thereby  procured, 
the  total  interest  paid  by  such  corporation,  company,  or 
association  within  the  year  on  any  such  indebtedness  may 
be  deducted  as  a  part  of  its  expenses  of  doing  busineas, 
but  interest  on  such  indebtedness  shall  only  be  deductible 
on  an  amount  of  such  indebtedness  not  in  excess  of  the 
actual  value  of  such  property  collateral :  Provided  further ^ 
That  in  the  oose  of  bonds  or  other  indebtedness,  which 

1120] 


Taxes 


Deductions, 

Foreign 

Corporations 


have  been  iBsued  with  a  guaranty  that  the  interesf^  payhble 
thereon  shall  be  free  from  taxation,  no  deduction  for  the 
payment  of  the  tax  herein  imposed,  or  any  othur  tax  paid 
pursuant  to  such  guaranty,  shall  be  allowed;  and  in  the 
case  of  a  bank,  banking  association,  loan  or  trust  company, 
interest  paid  within  the  year  on  deposits  or  on  moneys 
received  for  investment  and  secured  by  interest-bearing 
certificates  of  indebtedness  issued  by  such  bank,  banking 
association,  loan  or  trust  company  shall  be  deducted; 

** Fourth.  Taxes  paid  within  the  vear  imposed  by  the 
authority  of  the  United  States  (except  income  and  excess 
profits  taxes),  or  of  its  Territories,  or  possessions,  or  any 
foreign  country,  or  by  the  authority  of  any  State,  county, 
school  district,  or  municipality,  or  other  taxing  subdivision 
of  any  State,  not  including  those  assessed  against  local 
benefits." 

(2)  Paragraphs  third  and  fourth  of  subdivision  (b)  of 
section  twelve  of  such  Act  of  September  eighth,  nineteen 
hundred  and  sixteen,  are  hereby  amended  to  read  as  fol- 
lows: 

''Third.  The  amount  of  interest  paid  within  the  year  Interest 
on  its  indebtedness  (except  on  indebtedness  incurred  for 
the  purchase  of  obligations  or  securities  the  interest  upon 
which  is  exempt  from  taxation  as  income  imder  this  title) 
to  an  amount  of  such  indebtedness  not  in  excess  of  the  pro- 
portion of  the  sum  of  (a)  the  entire  amount  of  the  paid-up 
capital  stock  outstanding  at  the  close  of  the  year,  or,  if  no 
capital  stock,  the  entire  amount  of  the  capital  employed 
in  the  business  at  the  close  of  the  year,  and  (b)  one-half  of 
its  interest-bearing  indebtedness  then  outstanding,  which 
the  gross  amount  of  its  income  for  the  year  from  business 
transacted  and  capital  invested  within  the  United  States 
bears  to  the  gross  amount  of  its  income  derived  from  all 
sources  within  and  without  the  United  States:  Protnded, 
That  in  the  case  of  bonds  or  other  indebtedness  which 
have  been  issued  with  a  guaranty  that  the  interest  payable 
thereon  shall  be  free  from  taxation,  no  deduction  for  the 
payment  of  the  tax  herein  imposed  or  any  other  tax  paid 
pursuant  to  such  guaranty  shall  be  allowed;  and  in  case 
of  a  bank,  banking  association,  loan  or  trust  company,  or 
branch  thereof,  interest  paid  within  the  year  on  deposits 
by  or  on  moneys  received  for  investment  from  either 
citizens  or  residents  of  the  United  States  and  secured  by 
interest-bearing   certificates   of   indebtedness    issued    by 

[1211 


Taxes 


Deduction 
at  Source 


Penalty  for 
Failure  to 
File  Returns 


such  bank,  banking  aflsociation,  loan  or  trust  company,  or 
branch  thereof; 

**  Fourth.  Taxes  paid  within  the  year  imposed  by  the  au- 
thority of  the  United  States  (except  income  and  excess 
profits  taxes),  or  of  its  Territories,  or  possessions,  or  by  the 
authority  of  any  State,  county,  school  district,  or  munici- 
pah'ty,  or  other  taxing  subdivision  of  any  State,  paid  within 
the  United  States,  not  including  those  assessed  against 
local  benefits. " 

Sec.  1208.  (1)  That  subdivision  (e)  of  section  thirteen 
of  such  Act  of  September  eighth,  nineteen  hundred  and 
sixteen,  is  hereby  amended  to  read  as  follows: 

''  (e)  All  the  provisions  of  this  title  relating  to  the  tax 
authorized  and  required  to  be  deducted  and  withheld  and 
paid  to  the  officer  of  the  United  States  Government  author- 
ized to  receive  the  same  from  the  income  of  nonresident 
alien  individuals  from  sources  within  the  United  States 
shall  be  made  applicable  to  the  tax  imposed  by  subdivision 
(a)  of  section  ten  upon  incomes  derived  from  mterest  upon 
bonds  and  mortgages  or  deeds  of  trust  or  similar  obligations 
of  domestic  or  other  resident  con)oration8,  joint-stock 
companies  or  associations,  and  insurance  companies  by 
nonresident  alien  firms,  copartnerships,  companies,  cor- 
porations, joint-stock  companies  or  associations,  and 
insurance  companies,  not  engaged  in  business  or  trade 
within  the  United  States  and  not  having  any  oflfice  or 
place  of  business  therein." 

Sec.  1209.  That  section  eighteen  of  such  Act  of  Septem- 
ber eighth,  nineteen  hundred  and  sixteen,  is  hereby 
amended  to  read  as  follows: 

*'Sec.  18.  That  any  person,  corporation,  partnership, 
association,  or  insurance  company,  liable  to  pay  the  tax, 
make  a  return  or  to  supply  information  required  under  this 
title,  who  refuses  or  neglects  to  pay  such  tax,  to  make  such 
return  or  to  supply  such  information  at  the  time  or  times 
herein  specified  in  each  year,  shall  be  liable,  except  as 
otherwise  specially  provided  in  this  title,  to  a  penalty  of 
not  less  than  $20  nor  more  than  $1,000.  Any  individual  or 
any  officer  of  any  cor{X)ratioD,  partnership,  association, 
or  insurance  company,  required  by  law  to  make,  render, 
sign,  or  verify  any  return  or  to  suppl}^  any  information, 
who  makes  any  false  or  fraudulent  return  or  statenient 
with  intent  to' defeat  or  evade  the  assessment  required 

[122] 


by  this  title  to  be  made,  shall  be  gmlty  of  a  misdemeanor, 
and  shall  be  fined  not  exceeding  $2  000  or  be  imprisoned  not 
exceeding  one  year,  or  both,  in  the  discretion  of  the  court, 
with  the  costs  of  prosecution:  Provided,  That  where  any 
tax  heretofore  due  and  payable  has  been  duly  paid  by  the 
taxpayer,  it  shall  not  be  re-collected  from  any  withholding 
agent  required  to  retain  it  at  its  source,  nor  shall  any 
penalty  be  imposed  or  collected  in  such  C£ises  from  the 
taxpayer,  or  such  withholding  agent  whose  duty  it  was  to 
retain  it,  for  failure  to  return  or  pay  the  same,  unless  such 
failure  was  fraudulent  and  for  the  purpose  of  evading 
payment. " 

Sec.  1210.  That  section  twenty-six  of  such  Act  of  Sep- 
tember eighth,  nineteen  hundred  and  sixteen,  as  amended 
by  the  Act  entitled  *'An  Act  to  provide  increased  revenue 
to  detray  the  expenses  of  the  increased  appropriations 
for  the  Army  and  Navy  and  the  extensions  of  fortifications, 
and  for  other  purposes,"  approved  March  third,  nineteen 
hundred  and  seventeen,  is  hereby  amended  to  read  as 
follows: 

*'Sec.  26.  Every  corporation,  joint-stock  company  or 
association,  or  insurance  company  subject  to  the  tax 
herein  imposed,  when  required  by  the  Commissioner  of 
Internal  Revenue,  shall  render  a  correct  return,  duly 
verified  under  oath,  of  its  payments  ot  dividends,  whether 
made  in  cash  or  its  equivalent  or  in  stock,  including  the 
names  and  addresses  of  stockholders  and  the  number  of 
shares  owned  by  each,  and  the  tax  years  and  the  applicable 
amounts  in  which  such  dividends  were  earned,  in  such 
form  and  manner  as  maybe  prescribed  by  the  Commissioner 
of  Internal  Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury." 

Sec.  1211.  That  Title  I  of  such  Act  of  September  eighth, 
nineteen  hundred  and  sixteen,  is  hereby  amended  by  add- 
ing to  Part  III  six  new  sections,  as  follows : 

"Sec.  27.  That  every  person,  corporation,  partnership, 
or  association,  doing  business  as  a  broker  on  any  exchange  or 
board  of  trade  or  other  similar  place  of  business  shall, 
when  required  by  the  Commissioner  of  Internal  Revenue, 
render  a  correct  return  duly  verified  under  oath,  under 
such  rules  and  regulations  as  the  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the  Treas- 
ury, may  prescribe,  showing  the  names  of  customers  for 
whom  such  person,  corporation,  partnership,  or  association 

123] 


Return  of 
Payments  of 
Dividends 


Information 
at  Source 

Returns 
of  Brokers 


Returns  of 
Payors  of 
Miscella* 
Deous  Income 


Returns  of 
Debtor  Cor- 
porations on 
Payments  of 
Interest  on 
Bonds 


Disclosure  of 
Ownership 
of  Income 


has  transacted  any  business,  with  such  details  as  to  the 
profits,  losses,  or  other  information  which  the  compiis- 
sioner  may  require,  as  to  each  of  such  customers,  as  will 
enable  the  Commissioner  of  Internal  Revenue  to  deter- 
mine whether  ail  income  tax  due  on  profits  or  gains  of  such 
customers  has  been  paid. 

*'Sec.  28.  That  all  persons,  corporations,  partnerships, 
associations,  and  insurance  companies,  in  whatever  capacity 
acting,  including  lessees  or  mortgagors  of  real  or  personal 
property,  trustees  acting  in  any  trust  capacity,  executors, 
administrators,  receivers,  conservators,  and  employers, 
making  payment  to  another  person,  corporation,  part- 
nership, association,  or  insurance  company,  of  interest, 
rent,  salaries,  wages,  premiums,  annuities,  compensation, 
remuneration,  emoluments,  or  other  fixed  or  determinable 
gains,  profits,  and  income  (other  than  payments  described 
m  sections  twenty-six  and  twenty-seven),  of  $800  or  more 
in  any  taxable  year,  or,  in  the  case  of  such  payments  made 
by  the  United  States,  the  officers  or  employees  of  the 
United  States  having  information  as  to  such  payments 
and  required  to  make  returns  in  regard  thereto  by  the 
regulations  hereinafter  provided  for,  are  hereby  author- 
ized and  required  to  render  a  true  and  accurate  return  to 
the  Commissioner  of  Internal  Revenue,  under  such  rules 
and  regulations  and  in  such  form  and  manner  as  may  be 
prescribed  by  him,  with  the  approval  of  the  Secretary  of 
the  Treasury,  setting  forth  the  amount  of  such  gains, 
profits,  and  income,  and  the  name  and  address  of  the 
recipient  of  such  payment:  Provided^  That  such  returns 
shall  be  required,  regardless  of  amounts,  in  the  case  of 
payments  of  interest  upon  bonds  and  mortgages  or  deeds 
of  trust  or  other  similar  obligations  or  corporations,  joint- 
stock  companies,  associations,  and  insurance  companies, 
and  in  the  case  of  collections  of  items  (not  payable  in  the 
United  States)  of  interest  upon  the  bonds  of  foreign 
countries  and  interest  from  the  bonds  and  dividends  from 
the  stock  of  foreign  corporations  by  persons,  corpora- 
tions, partnerships,  or  associations,  undertaking  as  a 
matter  of  business  or  for  profit  the  collection  of  foreign 
payments  of  such  interest  or  dividends  by  means  of  coupons, 
checks,  or  bills  of  exchange. 

^'When  necessary  to  make  effective  the  provisions  of 
this  section  the  name  and  address  of  the  recipient  of  in- 
come shall  be  furnished  upon  demand  of  the  person,  cor- 

1124  J 


poration,  partnership,  association,  or  insurance  company 
paying  the  income. 

"The  provisions  of  this  section  shall  apply  to  the  cal- 
endar year  nineteen  hundred  and  seventeen  and  each 
calendar  year  thereafter,  but  shall  not  apply  to  the  pay- 
ment of  interest  on  obligations  of  the  United  States. 

"Sec.  29.  That  in  assessing  ineome  tax  the  net  income 
embraced  in  the  return  shall  also  be  credited  with  the 
amount  of  any  excess  profits  tax  imposed  by  Act  of  Con- 
gress and  assessed  for  the  same  calendar  or  fiscal  year  upon 
the  taxpayer  and,  in  the  case  of  a  member  of  a  partnership, 
with  his  proportionate  share  of  such  excess  profits  tax  im- 
posed upon  the  partnership. 

"Sec.  30.  That  nothing  in  section  II  of  the  Act  ap- 
proved October  third,  nineteen  hundred  and  thirteen,  en- 
titled'An  Act  to  reduce  tariff  duties  and  to  provide  revenue 
for  the  Government,  and  for  other  purposes,'  or  in  this 
title,  shall  be  construed  as  taxing  the  income  of  foreign 
governments  received  from  investments  in  the  United 
States  in  stocks,  bonds,  or  other  domestic  securities, 
owned  by  su(5h  foreign  governments,  or  from  interest  on 
deposits  m  banks  in  the  United  States  of  moneys  belonging 
to  foreign  governments. 

"Sec.  31.  (a)  That  the  term  'dividends*  as  used 
in  this  title  shall  be  held  to  mean  any  distribution  made  or 
ordered  to  be  made  by  a  corporation,  joint-stock  com- 
pany, association,  or  insurance  company,  out  of  its  earn- 
ings or  profits  accrued  since  March  first,  nineteen  hundred 
and  thirteen,  and  payable  to  its  shareholders,  whether  in 
cash  or  in  stock  of  the  corporation,  joint-stock  company, 
association,  or  irsurance  company,  which  stock  dividend 
shall  be  considered  income,  to  the  amount  of  the  earnings 
or  profits  so  distributed. 

(b)  Any  distribution  made  to  the  shareholders  or  mem- 
bers of  a  corporation,  joint-stock  company,  or  association, 
or  insurance  company,  in  the  year  nineteen  hundred  and 
seventeen,  or  subsequent  tax  years,  shall  be  deeme«l  to 
have  been  made  from  the  most  recently  accumulated 
undivided  profits  or  surplus,  and  shall  constitute  a  part 
of  the  annual  income  of  the  distributee  for  the  year  in 
which  received,  and  shall  be  taxed  to  the  distributee  at 
the  rates  prescribed  by  law  for  the  years  in  which  such 
profits  or  surplus  were  accumulated  by  the  corporation, 
joint-stock  company,  association,  or  insurance  company, 

[125  1 


Applicable 
to  Year  1917 


Excess 
Profits 
Tax  Credited 


Income 
Foreign 
Governments 
Exempt 


Dividends 


Rates 

Applicable  to 
Dividends 


but  nothing  herein  shall  be  construed  as  taxing  any 
earnings  or  profits  accrued  prior  to  March  first,  nineteen 
hundred  and  thirteen,  but  such  earnings  or  profits  may  be 
distributed  in  stock  dividends  or  otherwise,  exempt  from 
the  tax,  after  the  distribution  of  earnings  and  profits 
accrued  since  March  first,  nineteen  hundred  and  thirteen, 
has  been  made.  This  subdivision  shall  not  apply  to  any 
distribution  made  prior  to  August  sixth,  nineteen  hundred 
and  seventeen,  out  of  earnings  or  profits  accrued  prior  to 
March  first,  nineteen  hundred  and  thirteen. 

Sec.  32.  That  premiums  paid  on  life  insurance 
policies  covering  the  lives  of  officers,  employees,  or  those 
financially  interested  in  any  trade  or  business  conducted 
by  an  individual,  partnership,  corporation,  joint-stock 
company  or  association,  or  insurance  company,  shall  not 
be  deducted  in  computing  the  net  income  of  such  individ- 
ual, corporation,  joint-stock  company  or  association,  or 
insurance  company,  or  in  computing  the  profits  of  such 
partnership  for  the  purposes  of  subdivision  (e)  of  section 
nine. 

Sec.  1212.  That  any  amount  heretofore  withheld  by 
any  withholding  agent  as  required  by  Title  I  of  such  Act 
of  September  eighth,  nineteen  hundred  and  sixteen,  on 
account  of  the  tax  imposed  upon  the  income  of  any  indi- 
vidual, a  citizen  or  resident  of  the  United  States,  for  the 
calendar  year  nineteen  hundred  and  seventeen,  except  in 
the  cases  covered  by  subdivision  (o)  of  section  nine  of 
such  Act,  as  amended  by  this  Act,  shall  be  released  and 
paid  over  to  such  individual,  and  the  entire  tax  upon 
the  income  of  such  individual  for  such  vear  shall  be  assessed 
and  collected  in  the  manner  prescribed  by  such  Act  as 
amended  by  this  Act. 


Title  XIII — General  Provisions 


Sec.  1300.  That  if  any  clause,  sentence,  paragraph,  or 
part  of  this  Act  shall  for  any  reason  be  adjudged  by  any 
court  of  competent  jurisdiction  to  be  invalid,  such  judg- 
ment shall  not  affect,  impair,  or  invalidate  the  remainder 
of  said  Act,  but  shall  be  confined  in  its  operation  to  the 
clause,  sentence,  paragraph,  or  part  thereof  directly  in- 
volved in  the  controversy  in  which  such  judgment  shall 
have  been  rendered. 

[1261 


Sec.  1301.  That  Title  I  of  the  Act  entitled,  "An  Act 
to  provide  increased  revenue  to  defray  the  expenses  of  the 
increased  appropriations  for  the  Army  and  Navy  and  the 
extension  of  fortifications,  and  for  other  purposes,'^ 
approved  March  third,  nineteen  hundred  and  seventeen, 
be,  and  the  same  is  hereby,  repealed. 

Sec.  1302.  That     unless     otherwise     herein     specially   Effective 
provided,  this  Act  shall  take  effect  on  the  day  following  Date  of  Act 
its  passage. 


1127] 


Index  to  Synopsis 


Admissions  to  Amusements 
Adults.  56 
Boxes  and  Seats,  56 
Cabarets,  56 
Children,  56 
Exempt,  56 
Payment,  56 
Returns,  56 
Seats,  56 
Tables,  56 
Administrative  and  General 
Provisions 
Contracts  before  May  9, 1917, 

62 
Collection  and  Payment 
Additional  taxes,  60 
Advance  payments,  62 
Interest  on   advance  pay- 
ments, 63 
Method     not     specifically 

provided,  61 
Effective  Date  of  Law,  63 
Stamps  on  hand.  61 
Uncertified  checks,  63 
Penalties,  61 
Provisions  separable,  63 
Records  to  be  kept,  60 
Regulations  and  Rulings,  62 
Returns  to  be  made,  60 
West  Indian  Islands,  60 
Agreements,  47 
Automobiles,  53 
Berths,  37 
Beverages 

(Arranged  alphabetically) , 
38 
Boats,  52 
Bonds,  47.  48 
Cameras,  53 
Capital  Stock,  48 


Certificates  of  Indbbtbdness 

47 
Checks,  48 
Chewing  Gum,  53 
Cigars 

Rates  of  Tax,  44 

Retail  Defined,  44 

When  effective,  44 
Cigarettes 

Packages,  45 

Rates  of  Tax,  46 

When  effective,  45 
Conveyances,  48 
Deeds,  49 
Drafts,  49 
Dubs,  59 
Entries,  49 

Estates 
Rates,  51 
Exemptions,  51 

Excess  Profits 

Claim  in  Abatement,  24 
Corporation,  defined,  19 
Deductions    (See   Determina- 
tion of  Excess  Profits) 
Definitions.  19 

Determination  of  Excess  Prof- 
its 
Business    continuation    of 

former  business,  23 
Concerns   in    buslnass  dur- 
ing pre-war  period,  21 
Concerns   not    In    business 
during    pre-war    period. 
22 
Concerns  having  no  income 
or  subnormal  Income  dur- 
ing pre-war  period.  24 


[129] 


Ooncems  in  which  invested 
capital    cannot    be    de- 
termined, 25 
Determination  of  percent- 
age by  Commissioner  of 
Internal  Revenue,  24,  26 
Inability  to  determine  pre- 
war income,  22 
Limitation  on  deductions. 
22 
Domestic,  defined,  19 
Exemptions 

Corporations,  21 
Partnerships,  21 
Individuals,  21 
Non-resident  aliens,  20 
Trades  and  Businesses,  20 
First  Taxable  year,  defined,  19 
Fiscal  year,  34 
Foreign,  defined,  19 
Invested  Capital 
Assets,  excluded,  28 
Average,  monthly,  28 
Change  of  Ownership,  29 
Consolidation,  29 
Copyrights,  27 
Corporations 
Domestic,  26 
Foreign,  28 
Franchises,  27 
Good  Will,  27 
Individuals 

Citizens  or  residents  of 
U.  S.,  28 
Non-resident  aliens,  28 
Intangible  Assets,  27 
Patents,  27 
Trademarks,  27 
Law  repealed,  former  excess 

profits  tax,  34 
Net  Income 

Corporations,  30 
Defined,  20 
Individuals,  31 
Partnerships,  31 


No  capital  invested  in  busi- 
ness, 30 

Nominal  capital  invested  in 
business,  30 

Patents,  27 

Persons  subject  to  tax,  20 

Pre-war  period,  defined.  19 

Rates  of  Tax,  29 

Regulations,  35 

Reorganization,  29 

Returns 

Partnerships,  33 

Taxable  Year,  defined,  19 

Trademarks,  27 

United  States,  defined,  19 
Express,  36 

Facilities  Furnished  by  Pub- 
lic Utilities 

Berths,  37 

By  whom  paid,  36 

Cash  Fares,  36 

Express,  36 

Freight,  36 

Passenger  Fares,  37 

Pipe  Lines,  37 

Radio  Messages,  37 

Seats.  37 

Telegraph  Messages,  37 

Telephone  Messages,  37 

Tickets   Purchased    Prior    to 
November  1,  1917,  37 

Films,  53 
Freight,  36 
Games,  54 
Graphophones,  54 
Income  Tax,  Amendments 
Collection  of  foreign  Items,  18 
Deductions,  corporations 
Interest,  15 
Taxes,  15 
Deductions,  individual 
Contributions,  12 
Excess  Profits  Tax,  14 


[130] 


Interest,  11 

Non-resident  aliens,  12 

Taxes,  11 
Deduction  at  source 

Citizens   and   residents   of 
U.  S.,  13 

Dividends,  13 

Foreign    corporations    and 
firms,  13 

Non-resident  aliens,  13 

Refund  of  tax  deducted  in 
1917,  14 

Tax  free  bonds,  13 
Dividends,  corporations,  15 
Dividends,  individuals,  11 
Disclosure  of  ownership,  17 
Excess  profits  tax  deductible, 

14 
Exemptions,  specific 

Citizens    and   residents    of 
U.  S.,  12 

Non-resident  aliens,  12 
Foreign     Governments,     in- 
come, 4 
Information  at  source,  16 
Interest,  Government  bonds, 

13,  15 
Life  Insurance  premiums,  18 
Partnerships 

Fiscal  year,  12 

Interest     on     Government 
bonds,  13 

Returns,  12 
Penalties,  17 
Returns 

Brokers,  16 

Debtor  Corporations,  17 

Miscellaneous  Income,  16 

Partnerships,  12 

Payments  of  Dividends  by 
Corporations,  15 
Surplus,  undistributed 
Tax  on,  14 


Income  Tax,  War 

Chart  of  Rates  and  Taxes, 
Collection,  9,  10 
Corporations 
Collection,  10 
Dividends,  10 
Fiscal  year,  10 
Rate  of  tax,  9 
Deduction  at  Source,  9 
Effective  date  of  Law,  10 
Exemptions,  Specific,  9 
Fiscal  Year,  10 
Normal  Tax 
Individuals,  7 
Non-resident     aliens,     not 

subject,  7 
Rate,  7 
Returns,  9 
Surtax 
Rates,  7 
Insurance 
Casualty,  55 
Exempt,  55 
Fire,  55 
Inland,  55 
Life.  55 
Marine,  55 
Payment  of  Tax,  55 
Returns,  55 
Jewelry,  53 
Parcel  Post,  49 
Passage  Ticket,  49 
Passenger  Fares,  37 
Pipe  Lines,  37 
Plating  Cards,  49 
Power  of  Attornet,  49 
Produce,  50 
Promissory  Notes,  49 
Proxies,  50 
Radio  Messages,  37 


[131] 


Manufactures 

Articles  not  taxed,  53 

Automobiles,  53 

Boats,  62 

Cameras,  53 

Chewing  Gum,  53 

Films,  53 

Games,  54 

Graphophones,  54 

Jewelry,  53 

Patent  medicines,  54 

Payment  of.  52  53 

Piano  players,  54 

Records,  54 

Returns  of,  53 

Sporting  goods,  54 

Yachts,  52 
Munitions 

Expiration  of  Law,  59 

Rate  reduced,  59 
Patent  Medicines,  54 
Piano  Pi^tebs,  54 


Postal  Rates 

First  class,  57 

Second  class 

Advertising  matter,  57 
Other      than      advertising 
matter,  58 
Records,  54 
Stamp  Taxes 

(Arranged  alphabetically),  47 
Snuff 

Packages,  46 

Rates  of  tax.  46 

When  effective.  46 
Sporting  Goods.  54 
Telegraph  Messages,  37 
Telephone  Messages.  37 
Tobacco 

Packages,  46 

Rate  of  Tax,  46 

When  effective,  46 
Yachi:'S,  62 


1132] 


Guaranty  Trust  Company  of  New  York 
Functions  and  Facilities 


Guaranty  Trust  Company 
of  New  York 

Invites  accounts  of  banks  and  bankers, 
firms,  corporations   and  individuals 


Functions  and  Facilities 


Genmral 
Banking 
Department 


Foreign 
Department 


Bond 
Department 


Truat 
Department 


Transacts  the  general  business  of  the  bank; 
extends  credit;  pays  interest  on  daily  bal- 
ances, and  on  certificates  of  deposit. 

A  fully  equipped  banking  institution. 
Handles  direct  all  kinds  of  foreign  banking 
transactions  with  the  leading  banks  in  all 
parts  of  the  world.  Accepts  time  drafts 
for  the  purpose  of  financing  shipments  to 
or  from  the  United  States.  Issues  letters  of 
credit  and  travelers'  checks. 

Investigates,  examines,  and  underwrites 
bond  issues;  gives  advice  to  customers  in 
regard  to  their  investments;  buys  and  sells 
securities. 

Acts  as  trustee  under  corporate  mortgages. 
Acts  as  executor,  administrator,  administra- 
tor with  the  will  annexed,  testamentary 
trustee,  guardian  of  estates  of  infants,  com- 
mittee of  property  of  incompetents,  trustee 
under  voluntary  trusts. 


Transfer, 
Registration, 
Coupon,  and^ 
Reorganization 
Departments 


Income  Tax 
Department 


Foreign 
Offices 


Acts  as  depositary  and  agent  of  voting  trus- 
tees; holds  securities  or  cash  under  escrow 
agreements. 

Acts  as  custodian  of  securities  and  financial 
agent  for  individuals  and  corporations. 

Acts  as  transfer,  fiscal,  and  disbursing  agent; 
registrar,  co-registrar,  and  depositary  for 
corporations  organizing,  reorganizing,  or 
established. 

Assists  customers  and  others  in  solving 
questions  concerning  the  requirements  of 
the  Federal  Income  Tax  Law,  and  in  com- 
piling annual  returns. 

This  Company  maintains  fully  equipped 
oflSces  in  London  and  Paris.  It  has  resi- 
dent representatives  in  Petrograd  and 
Buenos  Aires  and  travelers  in  many  coun- 
tries abroad,  affording  to  importers  and  ex- 
porters complete  facilities  for  extending 
their  international  trade. 


Pull  details  of  the  facilities  offered  by  any  or  all  of  the 
departments  will  be  sent  on  request. 


366496 

Or  73 


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